Closing Bell - Closing Bell Overtime: 6/29/26

Episode Date: June 29, 2026

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, Melissa Lee 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.

The bell's bringing an end to the trading day at the NYC, Deutsche Bank, ringing the bell. And at the NASDAQ, it's SR Bank Corp. Welcome to closing bell overtime. We're live from Studio B at the NASAC market site. I'm Melissa Lee, along with Mike Santoli. Stocks mostly higher today, the Dow of 300 points. First close above 52,000, the S&P 500, gaining 1% of the NASAC up more than two.

The newly rebalance Russell 2000 flat. Also on our radar at the close Comcast with another spinoff. The shares soar and then pull back a bit. So what's the next step? And the Supreme Court says President Trump can't fire Fed Governor Lisa Cook, at least not yet. What does it say about Fed independence? And we'll get you set for Nike earnings tomorrow. The stock down 35% this year.

As for today, we are awaiting results from air environment. We'll have those numbers as soon as they are released pretty much flat during the session. It was an interesting day today you're saying in the previous hour, that's basically an inversion of what happened last week because last week was a little shaky. Pretty much. Last week, you had very broad rallies. You had most stocks up, even with the S&P itself on a five-day losing streak. The Russell was a big outperformer.

Guess what? It's a new Russell. I keep talking about that. A lot of the big cap, more speculative AI geared stuff is out of there. So I don't think it changes overall trend. I mean, the S&P 500, we kind of up and above and below 7,400 again. We were at 7,600 six weeks ago. So I think it's sort of the market trying to kind of rebalance itself a little bit as we get into month then.

but it's very, I think, indecisive at this meeting. It doesn't tell us what the next move is. It's just sort of finding a way to kind of stay in place. Yeah, I thought what was really notable about today's sessions, for as much as there was a backlash against memory pricing today, you had bidders come in. I mean, at one point today, the Round Hill Memory ETF, DRAM, was down about 5%.

Yeah. Finish the day flat. So we really saw a turnaround in semiconductor. So even on weakness, buyers still stepped in and bought it. They buy it and sell it multiple times a day. I mean, I think that's one of those things. So, I mean, I pointed out this morning, I think the Philly Semiconductor Index, average move in June was almost 4%.

Daily move. Wow. So it's very twitchy. And I feel like as much as you say, yes, people that have high conviction in this trend, you wonder if it's a little bit too erratic for the good of the market. Yeah, exactly. Let's get some more on today's action. Christina Parts and Novelas is here at the Nazak with more on that.

Christina. What you guys talked about the S&BFPA 500 higher? Snapping a five-day losing streak. Big Tech really led the way by Alphabet, Amazon, and Tesla, really the big winner. up over 8%. Software actually bounced, even though chips are higher after four straight weekly declines, specifically for the IGV ETF led by strategy and Blackberry. Chips were mixed. You guys talked about it. S.K. Heinex and Samsung closed lower after unveiling more than a $500 billion investment in semiconductor space within South Korea. The supply implications hit Micron and

Sandisk, although micron, no, it was green and closed negative, so both negative. But the sector as a whole rebounded. The SMH is still on pace for its best quarter ever. Driven, of course, today, by equipment names like Lamb Research, applied materials, which hit a record high. There was some price target upgrades. Semis have literally gone from 2% of the S&B 500, maybe about a decade ago, to nearly 19% today. That's what we talk about a lot. In consumer discretionary, auto-related names led the tape. We talked about Tesla, but there's also Carvana AutoZone, also higher. Materials lagged. Martin Mereda, closed lower after announcing a, $13.5 billion merger deal. Steel dynamics, new core, lower, along with chemical makers.

And bring this up because Dow and Lindele basal was also lower. But Dow is now on its 10th straight losing session right now. And then other big movers, you had Blume Energy jumping on news as joining the Russell Tooth. 100 mega cap index. You guys talked about rebalancing. Stock is up more than a thousand percent just over the last 12 months. And last but not at least, Super Michael, sliding on reports that its offices were rated in Taiwan. on as they expand its chip smuggling probe I reached out to the company, haven't heard back, but that's why rivals Dell and HPE were also higher when that news hit. Guys?

All right, Christina, thank you. So with today's bounce in the mega caps, is the market undergoing another big rotation or was today just a fleeting move with us now as chief investment strategist at Man Group, Christina Hooper and Cameron Dawson from New Edge Wealth, the CIO there. Welcome to you both. Good to see you. Cameron, we're going to draw a message out of all of this. I mean, on some level, it does represent an ongoing debate about beneficiaries of AI where it's going to cost more.

Yeah, I mean, you look at the year-to-date performance of the Mag 7 versus the semiconductors. Mag 7 is down 5%. Semiconductors are up almost 86%. So almost a 90% difference between these two cohorts. And this is the market telling us that we don't like those names that are having to spend on AI using all of their balance sheets, all of their free cash flow, tapping equity markets in order to fund all of these investments that we're seeing within semiconductors. And we do know that if you have continued pressure on those stocks, we have to question whether or not these companies are going to be as willing to spend going forward. And what would that mean for the likes of a name like Micron,

who's certainly enjoying this supply constraint? Yeah. I feel like the investors have not factored in what could be a bear case. And maybe it was seen as a black swan, but here it is, the possibility of a company here buying Chinese chips. And all of a sudden, that opens, sort of of the floodgates, the Chinese market to come in here and sell chips and maybe undercut the likes of Micron. Have you thought about, I mean, are you concerned about that as sort of being the case that cuts this trade? Absolutely. I think there are a number of possible bare scenarios. That's just one of them. We could certainly see, especially after the Deep Seek announcement, that really opened the door to the potential for some kind of very significant alterations to

the AI space because they're doing things. In general, Chinese companies are doing things at lower costs. I think also there are other external pressures, for example, helium. The scarcity of helium is a real concern. We saw that facilities in Qatar were essentially taken out. The infrastructure has been impacted quite significantly from strikes during the Middle East War. And as a result, we're unlikely to see that enough helium in probably a year or more. And then, of course, nothing's changed since last week in terms of the Apple increase in prices, right? And that tells us $300 is a big nugget. And that tells us that semiconductors are going to get a lot more expensive. So that pressure on the hyperscalers is only

going to grow because it's going to be more costly. So I think there are a lot of bear cases scenarios possible. Does an array of potential bear cases mean that you want to actually try to exploit them right now? Or what does it net out to from an investor's perspective? I think it's about having exposure, but also being well diversified. So having that exposure to perhaps some Chinese AI-related names, semiconductor chip names, really the gamut, because it's a very different approach. And then also look within the AI food chain for opportunities that won't be impacted by some of the headwinds we're seeing. How about you, Cameron, or do you respect sort of the uptrend that we're in overall in the markets? And a big part of that is semiconductors. Yeah, I think

Christina's earlier point how semiconductors have become such a large portion of the S&P 500 means that the vagaries of the semiconductor path are really going to be a big driver of what we see within the overall S&P at nearly a 19% weight. I'd also note for the Russell 1000, given this Constitution, reconstitution, it's an even larger weight. And we know that these indices are historically very cyclical. And the question is, are they still going to be cyclical in this huge super cycle with AI cap-ex. There was a great stat out of CLSA back a couple of weeks ago. Looking at two years ago, memory was 8% of an overall CAP-X for hyperscalers. It's expected to go up to 48% by the time we get to 2027. So if you're raising prices that much, that tends to lean towards this concept of demand

destruction, which is, of course, what everybody was concerned about with Apple. Yeah, and it leads to this idea that maybe the spenders are kind of getting less than they thought they would. We have these massive headline budgets that they put out there. And obviously there's friction in there in terms of what they're able to procure with that. There's a lot of celebration, Christina, on the performance, let's say, of health care last week. Or financials have been hired. Everybody seems to root for a broadening of the market away from tech or from semiconductors. And granted, that, I guess, would be healthy for a stock picker and maybe for the market's own health. On the other hand, it doesn't look like much on a longer term chart. I mean, this little equal weight outperformance,

And none of it looks like it makes a dent. So does it matter? So I think it does in that we could very well be seeing many different industries benefiting from the application of AI. And I talked about China has a very different approach to AI. One of the areas of focus is on utilizing AI to make manufacturing more efficient. So I think that what we're likely to see is in areas like healthcare, AI will improve operating efficiency, improve profit margins. So I do think that's the next frontier. And to the extent that we're seeing a broadening out, I think AI will be part of that story. Is that what do you believe also? I mean, is it time to finally say, you know what, we're going to benefit from the productivity gains and so therefore invest in those companies and not necessarily

the AI companies? Yeah, I always subscribe to the margin, to the statement that narrative follows price. So we see these big price moves near quarter in, certainly feels like a certain degree of rebalancing. We saw a similar big price move at the start of the year. Remember, it was the last Shelby first kind of market where you had things like staples rallying, healthcare financials doing better. And of course, those rallies started to fade and tech took back over because that's where the earnings growth was. And so if we look at where we're seeing positive earnings revisions, yes, you're seeing in tech, surprisingly, you're actually even seeing it in software. So software is still seeing an upward lift. But materials have positive revisions. Of course, we know energy because of higher

prices, financials as well. So we really use the earnings revisions to be the tell-all to how sustainable these kind of counter-trent rallies are. It's remarkable how we can have, you know, pretty thorough discussion of the market right now without referring to broader economic trends, right? It's almost as if the construction of the indexes and the dynamics underlying earnings are so dependent on the AI-CAP-X theme that we don't have to worry about the consumer or anything else. Absolutely. I think there's also a big. story here, which is that we're seeing greater chasm between Main Street and Wall Street. What's happening in the stock market is not reflective of the overall economy. And that's how we're getting

such strong returns in an environment in which I would argue economic growth is pretty weak and has a potential to get worse. Christina Hooper, Cameron Dawson, thank you so much for being here. Appreciate it. Well, Comcast shares moving higher today, but way off their best levels of the day. Still near 12-year lows, the company announcing it plans a spin-off NBC Universal in Sky. Comcast already spun off cable networks, including CNBC, to create Bersent. Shares of charter communications meantime up 10% today on hopes this move could clear the way for charter and Comcast to get together. On the conference call, Comcast co-CEO Brian Roberts was asked whether this move set the stage for dealmaking. He said, absolutely not the other company co-CEO, I should say,

Mike Kavanaugh, who will lead the new company, said definitely not, both instead emphasizing organic growth. Charter communications investors certainly don't believe that narrative, Mike. We saw bonds move up for charter. We saw CDS come down. So this whole idea that charter will be rescued by Comcasts still exist. It's not going to go away. I mean, there was also a little bit of a news item. It was kind of vague about a charter relationship with SpaceX to look into some things. So who knows if that was helping as well. It's what management always is going to say. You know, this isn't all about putting companies in play. But it does show you that stock performance and valuation is going to dictate corporate strategy to some degree because the stocks had really just, industry-wide,

gotten so depressed. And the valuations rock bottom was almost like we have to try something and see if the market prefers, you know, this structure. Especially at a time when there's media M&A to be had. And so to put these pieces out on the table is much more promising, I guess. Exactly. It just creates optionality all around. Yep. For more on what this all could mean for M&A in the media space, let's bring in Moffat Nathism, partner and senior analyst Craig. Moffat, Craig, great to have you with us. Yeah, good to see you, Melissa.

So now all of a sudden, are these assets, NBC Universal, are they on the block? Nope. They're not. I think Mike had it right that these stocks have performed so badly. You can imagine that there was at least the potential for some activism. This probably heads that off, but I don't think you need to reach for M&A as the reason to do this. Look, the NBC transaction in retrospect now, what, 15 years ago, turned out to be a very good financial transaction, but strategically it never made all that much sense.

And so separating them, it is, I think, the right thing to do. It lets both businesses run on their own. And it does highlight exactly what Mike was just talking about, and that these valuations are so cheap that it sort of hits you in the face. Charter, for example, has a 100% equity-free cash flow yield three years out. I've never seen anything like that in a 30-year career. So you've just got such abject pessimism in these stocks that anything that you can do, that highlights the value here is probably to the good.

And I guess, Craig, if you wanted to find a way around that abject pessimism, you'd have to have a theory of what the future of the connectivity business is, the broadband business, is it really under kind of mortal threat from things like satellite? Well, right. But maybe the answer is simply it's not. You know, this is, the broadband business is not the video business of 20 years ago. where you could look out and say, this is now a business that's entering

a period of secular decline. The issue in the broadband business is simply that you're seeing some market share shifts, but the broadband business overall is not declining. And so the real question is just, is there an equilibrium for market share? And of course there is. So when you reach an equilibrium for market share,

everybody grows at the market growth rate. Now, there's oscillations around that, and there are questions about how much share is taken before you reach equilibrium. But this is not a case where these companies are simply going to decline to zero. It's simply when are they going to find their equilibrium? And what does that mean in terms of long-term valuation? And right now, I would argue they're just way, way too cheap. What do you foresee as being the future for NBC Universal?

You know, NBC is, first, let's acknowledge, they have some really good assets, right? Especially now that they've spun off versant, no offense, the growth profile of what's left is better. The theme parks is a very substantial part now of the NBC Universal business. And by all accounts, the theme parks business is a good one and is operating at a high level. and I think everybody would agree that peacock is too small and needs some kind of a solution to scale. But it doesn't have to be M&A to get Peacock larger. You know, you can reach the scale that you need

with distribution agreements. Remember, the issue of size is not how big is the company. For streaming, the issue is how big is the bundle of content, and you can get a bigger bundle of content through partnership agreements with other streamers in a way that doesn't require M&A. Right, and doesn't require, you know, vertical integration, apparently. You could just kind of be open to all in that context. Craig, I'll have to leave it there.

Thanks very much. Appreciate you weighing it today, Craig Maw. My pleasure, Mike. Good to see you. All right, well, shares of Aerovirement jumping in after hours trading the company reporting earnings of $1.84 a share that compares to the estimate of 146, revenue also better than expected. Autonomous systems revenue, a beat, but space, the new hot area. Those revenues were a few million short of forecast shares up just over 10% right now. Another piece of news, the market's digesting this morning.

The Supreme Court says President Trump can't fire Fed Governor Lisa Cook, at least not now. Let's bring in Steve Leesman now for more, Steve. So maybe not a fully unexpected decision, but really interesting in terms of implications. I think so. As far as it goes, Mike, when it comes to legal cases in President Trump, it's almost never over. And he has vowed to take immediate further action after a narrow Supreme Court victory for Fed Governor Lisa Cook. Cook had contended that she was fired unconstitutionally by the president on unproven and, by the way, unindicted allegations of mortgage fraud. Writing for the slim 5-4 majority, Chief Justice John Roberts writes, the court decides his application on the narrow ground that the president failed to afford Cook the procedural protections to which she was entitled by statute. So that's it. FHFA director, Bill Pulte, who initially uncovered the allegations and informed the president about them, saying in a tweet that Cook will be indicted for mortgage fraud, which

Cook has denied and unclear how Pulte knows that. The president saying he will, quote, take immediately to make sure, act immediately to make sure that someone who had committed wrongdoing will not be making vital decisions concerning the welfare of the United States of America. So Cook remains in place and Fed independence wins a narrow victory. The court created something of a high bar for removal of Fed officials in the future. But the president, vowing to keep the fight going, Mike. Yeah, and Shirley Will, on some level, Steve, you mentioned that the court did very, really explicitly say the Fed is different

and going all the back to Alexander Hamilton to say why that might be the case based on how kind of national banks were set up as to be somewhat independent. What does it mean, if anything, at this point for Jerome Powell's tenure still at the Fed now as a governor? He said he would stay on until perhaps some of these issues were settled. I think this is one of the issues he probably wants to have settled before he takes off. There's still the IG report. There's all these task forces that are out there. I mean, he has to make an assessment as to whether or not he feels his presence will be significant for maintaining the Fed's independence. But certainly, this is one of them.

But, Mike, it wasn't 9-0, like you've got to be kidding me about firing a Fed official. And it comes with this, a lot of criticism in the legal community about the difference as to, you know, the Fed is over here and all of the other regulatory agencies that execute executive power are on the other side and the president can fire them. So there's a lot of head scratching out there among the constitutional scholars trying to figure this out, which makes some worried that, you know what, 5-4 can be 4-5 the other way with another case that's slightly different. Steve, let's say Lisa Cook was found to have committed mortgage fraud. Could she then be removed? I mean, is that in the bylaws? Could you ask me what the percentage probability is of the next rate cut, Melissa? I maybe have more expertise in that.

But I will tell you that my read is that it is possible that that could stand. It has to be the bar. they do not tell you what the bar is. They say it has to be a serious offense. It has to be related to the actual job the person is doing. So you have to make up your mind as to whether that's the case. You can see what they did there. They decided it on narrow grounds. And that was the way they were able to cobble together a majority, a five, four majority. Have they gone any broader and provided broader protections for the Fed and said, no, this is the rule that you can't do it. This is what cause means. He may not have been able to get that majority. So I would say we're

on shaky grounds on that part when it comes to Fed independence. And we'll see the extent to which, I mean, you raise this question, Melissa. I think you're not just trying to create trouble here. It's a good question. If that indictment comes through, does the president then use that once again as the possibility for firing her? Steve, we shall see. Thank you. Steve Leesman. Pleasure. Bitcoin reclaiming the $60,000 level today. but that is still more than 50% drop from its all-time high. That sudden decline is forcing some big changes from one of its biggest bowls. That is next, and we will check in on the new look for the Dow Industrials.

You're watching Closing Bell overtime, live from the NASAC market site. Americans are borrowing more to cope with inflation as rising prices continue to put pressure on household budgets. According to the Federal Reserve Economic Data, total U.S. consumer credit reached $5.1 trillion in March. That's the largest monthly increase in a year. Non-revolving credit, which includes auto and student loans, surge $15 billion to a record $3.8 trillion. Total consumer credit has now surged more than $1.05 trillion since the 2020 pandemic. That's adding to delinquency concerns with the New York Fed saying the percentage of credit card balances that are severely delinquent has hit more than 13.1%. So directionally, it does seem as if, you know, the people kind of came to a point where you needed to stretch to,

to obviously make the budget make sense. I would just add a little context that in aggregate, as a percentage of the overall economy and even consumer like disposable income, it's not quite back to anything like critical levels. It's one of those things where people who haven't used debt are maybe pretty strapped. But if you collect it all together and so many people don't have balances, that from a macroeconomic perspective, it just doesn't seem like it's a squeak. Yeah, I mean, this is aggregate data.

So we don't know who is taking the debt out. and there could be an argument that is made that people are employed. They feel good because of the stock market gains because of their house gains. And so they are going to take on credit because they feel confident in their job or they feel good enough to do that. And so there's, you know, it's sort of whatever you want to see in the data is what you see. Yeah, I mean, directionally, it kind of is what it is. But I just don't know that it gets to a threshold where like I look at household debt service as a percentage of income. It's below where it was before the pandemic.

It's like 11.5%. It was like 15 plus before the global financial crisis. Wow. All right. Well, strategy announcing an overhaul of its financing model and saying it may sell up to $1.25 billion of Bitcoin to bolster its cash reserve. It's a new plan which includes a board-approved cash reserve policy, revised dividend policy, repurchase programs and a Bitcoin monetization program. The company also said it would become more disciplined about issuing common equity, given that its shares trade at or near the value of its Bitcoin holdings. the stock moved higher in the back of the announcement today, but it is down 43% this month following the move in Bitcoin, which is down 18%. So it's interesting. They're going to operate sort of on financial discipline as opposed to based on an ideological position. Yeah.

And there is a thinking that if micro strategy or strategy, I should say, actually stabilizes that that could actually help all of Bitcoin stabilize as well. It is circular, right, because they were always considered the marginal buyer. Now, if they're going to, to allow for sales, it is ironic that they are doing so in order to make sure that they can pay their cash dividends on all their securities in dollars, right? That's what it is. They became a company of creating like a Bitcoin cash and then financing it with all these on the run equity offerings and then preferred shares that they pay a high dividend. So it's kind of a fun, you know, corporate finance thought experiment, real life experiment, frankly, I guess. Well,

Well, halfway through 2026, the S&P 500 is already up 8%. It's 7440. Some of the most bullish calls on the streets see it topping 8,000 this year, but by one measure could be even higher. That's coming up on overtime. Welcome back. Shears of Verizon falling 5% today on reports that SpaceX could launch a mobile phone service. Verizon also announcing a joint venture with BT Group and its first stay of trading after being removed from the Dow Industrials. Meanwhile, Google, the stock replacing Verizon, adding,

nearly 100 points to the index as it rebounds after an 8% loss last week. The other Dow chain today, Honeywell International completing its breakup, the original company stays in the Dow. The new Honeywell Aerospace starts trading under the ticker H-O-N-A. All right, let's take a look. Another kind of index construction story here, S&P 500, this is not dollars, it's meant to be the index levels. This is the actual index. What we have here is a hypothetical that FACSET computes based on all of the industry analysts stock price targets for all the companies they cover. So it's a question, what if all those targets were met? And you derive from that an implied S&P 500 target, which gets you to 8918. That's up almost 21% from here, much higher than any actual kind of

strategist is saying it might go up to. And I had the question, okay, how does that compare to the normal upside implied by these? It's a lot higher. So John Butters over at Fax that said that said that the 1, 5, 10, 15, 20-year average is like up 13 to 14%. So all I'm saying is basically the sell side is pretty bold up. I think it's because earnings momentum has been so strong. And some stocks are down so much that it's left their price targets with a big gap. So keep it in mind. I don't think that we lack for optimism.

Right. I mean, not price targets only, but estimates have also gone up significantly at least for the second quarter and for the full year. So you add that. And then also, I would imagine that the price targets and the estimates go up the most for the mega cap companies and the AI companies. They had the greater way in the S&500. So this index makes it completely. And then that other dynamic, I mean, when you see what's happened to Microsoft and there have not been a lot of price target cuts,

so the stock's down a lot and it implies a lot of upside. Exactly. A lot of asterisk here. Tie now for our CNBC News update with Contessa Brewer. Contessa. Melissa, thanks. JetBlue flight from Las Vegas to New York reported striking a drone while approaching JFC. K International Airport today in New York. That happened at about 3,000 feet. The plane, we're told,

landed without incident. A post-flight inspection did not reveal any damage to the aircraft. The FAA says it's going to investigate what happened here. The Trump administration will pay Duke Energy $129 million after it agreed to abandon plans to build an offshore wind farm off North Carolina. Under the deal, the company will surrender its lease in federal waters and invest in other sources of energy favored by the White House, including nuclear and natural gas. The settlement is slightly less than what the utility company paid for the lease under the Biden administration. And the Democratic Republic of Congo banned public gatherings in four provinces as it battles a deadly Ebola outbreak. There are plans for a big protest in the capital city of Kinshasa against reforms to the country's

constitution. That outbreak now has killed more than 350 people in the DRC since May 15th. So they're trying to get a handle on it there. Guys, I'll send it back to you. Contessa, thanks. Contessa Brewer. Shares of Nike, the worst Dow component over the past year, down 42%. The CEO has now been on the job for a year and a half. When will a turnaround take hold? I'll talk to an analyst who's been bullish ahead of the company's results tomorrow. That's coming up on overtime. Welcome back to closing bell overtime live from the NASDAQ market site. All the major averages closing in the green. The Dow hired by 306 points to a new record high close, and its first above 52,000. The S&P 500 up more than 1%, a gain of 2% for the

NASDAQ, and the Russell 2000 squeaking into the green by less than one point. It was a comeback day for the Mag 7 as a group. Tesla up 8%, Google gained 5, Amazon up 3. Apple and Microsoft, though, were both lower. And Air Environment, beating on earnings and revenue, the company's CEO, saying it's in position to capitalize on some hot areas, including space and drones. Stock up 15% now. Nike is set to report earnings after the belt tomorrow with the stock significantly underperforming. The company is facing pressure on margins after they've declined year every year year for seven straight quarters. Sales also will be in focus. Last quarter, the company expected sales in this current quarter to fall between 2 and 4 percent, and it expects China sales

to fall 20%. Shares of Nike are up today, but the stock is down nearly 25% this year, off 73% in the last five years. Joining us now is Adrian Yew. from Barclays. Adrian, great to have you with us. Thanks for having me. You upgraded Nike, I believe in March, and since then, specifically, the stock is down roughly 25% as losses for the entire year. Why should investors stick by and is valuation enough to make the case to be in it? Yeah, I think that really what you have to think about here is a multi-year horizon. And I agree we were upgraded in kind of that $55 range. Stock looks like it might even break kind of that $40 tomorrow. So we're not recommending that people step into it, you know, for the tomorrow print.

We actually think that they're going to materially reset their FY27. They haven't given guidance yet, but remember, they have an odd May year-end, so they're going to have to give a look into FY27. And I do think that they're going to reset the bar once again. China's still a problem. And then just overall, there's some uncertainty kind of with the macro backdrop. But here's a thought exercise. The last time that the stock was at these levels was over 10 years ago, call it 2014. And at that time, the sales were kind of in that $30 billion range. Stock was on the move. It was growing. They were at a 13% operating margin. Today, we're sitting on $46 billion of sales at a 5% operating margin. And by the way, $4.5 billion of demand

creation, which eclipsed is kind of their two biggest running competitors, Hoka and on combined. So really the thought here is, as with many of these turnaround, these retail and these consumer brands, they go in and out. And sitting here at 5% operating margins, we do think that they are grossly under-earning. Having said that, keep your powder dry and wait for these opportunities to potentially dollar cost over some period of time. Andrew, what's the pushback on that notion that they're under-earnings?

that these margins are unduly depressed, that there's nothing structurally that has changed. Because, you know, as you suggest, on a sheer price to earnings basis, it looks exactly the same valuation as 10 or 12 years ago. Yeah. The single biggest pushback is that we have a new world order.

It's also interesting, if you look at geographically, the company since pre-COVID has lost 7% market share globally. And then the interesting thing is they've lost 7% market share in each of the US, in Amia and in Asia. But in each of those regions, they've lost that 7% to different people.

Hoka and On in the US, Adidas for the most part, as well as Hoka and On in Amia, and then Anta, right? So on to and Li Nang in the China market. So it's almost like they're turning around the business on three different landscapes in three different platforms. And so that's probably the biggest kind of negative What I would say in counter argument to that is that we still have on the global landscape, a company that has 32% global market share with the second competitor being Adidas at 15%.

And so when you look at the entity on whole, they're doing the right things. They have to reaggratiate themselves with their core consumer. And it takes time and it's like turning the Titanic. You know, Adrienne, when you outlined all the competitive threats they face in three different, major regions. It made me think that, wow, Nike's products really, I mean, consumers are really just turned off in general by the lack of innovation all around the world and are looking to anything else, any other brand for their athletic gear. It seems like it's a bigger challenge. And then at the same time, you've got the macro, which you do outline in greater China and Europe, which are a problem. Are you

seeing any evidence that that might show some progress, those two areas, on a macro basis? Yeah. So, So on China, no. So in China, the out quarter may very well be similarly or just marginally better, right? You know, second derivative down 20% this quarter. I don't think it's going to get much better. And we do think that FY27, you're still going to have negative sales. Because they're trying to clean up that marketplace. The only way to do that is to stop selling the product that is at 50% off.

In Europe, what I would say is we have seen some signs of European macro-stations. stabilization. Right now, Adi is kind of, you know, taking up that lifestyle that Nike has sort of withdrawn from. So there's probably a little bit of that there. But Emia is not as big of a kind of secular trend, right, or secular issue as we think the competitive landscape might be in the China market. Adrienne, you really appreciate it. 23 and a half hours till we get those numbers for the quarter. Thank you. Thank you. All right, China is making more capable AI models available, just as the U.S. is doing the complete opposite. Up next, a look at what it could mean in the race for AI dominance.

And here's a look at some S&P 500 stocks hitting new highs today. Travelers, Johnson & Johnson, Eli Lilly, Corning, and Valero among closing. Bell, overtime. We'll be right back. Welcome back to overtime. Apple shares unable to hold on to early session games today as ongoing concerns about memory prices hit the stock. According to a published report, Apple is lobbying the White House to allow it to purchase memory chips from China's CXMT, which is currently on the Pentagon's blacklist. That comes in the wake of Apple raising prices for MacBooks and iPads because AI data center demand is causing a memory chip shortage, causing those prices to go higher. I think this underscores two different issues here. First of all, the blacklist issue. The blacklist only prohibits these companies, these blacklisted companies from doing business with the Pentagon with securing DOD contracts, not doing business with you. U.S. companies. And so there's a sort of, I don't want to say double standard, but if these are

national security risks that they don't want to be unleashed, you know, in the military, why are the public exposed to those same risks? And so far, there's a lot of those inconsistencies there where blacklisted Chinese companies are, in fact, able to do business with the U.S. companies, and we do have a lot of devices with these Chinese components. There's that issue. And then also just this notion is, if Apple is permitted to buy memory chips from China, then what will happen in terms of of the Chinese undercutting. We've seen this time and time again with so many different industries

where they just come in, they undercut on price, and the floodgates are open. And what does that do to sort of this whole trade that is predicated down this notion of rising costs forever and everybody's going to pay for it at nausea.

Yeah, I mean, the micron trade is that nobody has a choice. That's kind of a premise of it. And I do think it really just highlights in general this idea of just incentivizing workarounds wherever possible. Yeah.

You know, it's reflective of how the AI trade has become a little bit in tension with itself. You know, we talk about the cerebrous IPO. And the whole bull case is you're going to need less memory. If you do that. I mean, if you want to give SpaceX credit for at some point doing data centers in space, then we're still spending a lot of money on the boxes here. Maybe that's, that's misguided. So I do think there's a little bit of a push pull inside that AI thesis. Yeah, absolutely. Well, speaking of AI is the U.S. becoming increasingly at risk of losing the AI ecosystem race. Dear Jorboza is here to weigh a, Hi, Dee. Hey, Mike. So the risk now is not just that China catches up in AI because it's basically there.

The risk is that the rest of the world starts building on Chinese AI. And that's really the paradox in the AI trade right now and one that Washington will have to navigate very carefully. The U.S. is slowing access to its most powerful models. Now, that has created an opening for Chinese models. A number of companies like Coinbase, Airbnb, Shopify, they're already shifting at least some workloads to these open source models. more will follow, our following, as a way to rein in AI costs. Now, people I talk to say that the next focus in Washington could be the Chinese models themselves, including whether to restrict or even ban them. But that could backpire too. If the U.S. blocks Chinese models at home, that will not stop developers,

companies, governments outside of the U.S. from building on them. In fact, it could actually push China to move even faster and position itself as the alternative to U.S. controlled AI that could get cut off at any time. So the ecosystem here is the bigger risk. And if Chinese open source models become the foundation, the way that Android became the default mobile operating system for much of the world, China doesn't just get users here. It gets influence, the same, the standards, the defaults, the rules of the next AI stack. That is happening sort of at the software level. And as you guys were just talking about, we've seen it happen with hardware before. That could be another shoot-a-drop later this year. I mean, we saw that with Huawei, for instance, where Huawei was, you know, companies here were forced to rip and replace Huawei equipment from their networks, but Huawei meantime operates elsewhere in the world selling their equipment. And you wonder if this is going to sort of play out in the AI world. But Deirdre, in terms of security and the grounds for which, you know, lawmakers could say we should ban or we should limit the use of these Chinese open source models. What are the risk? I mean, people will say, oh, it's open source. You could see everything in there. But is it more easily to be easy to be hack. I mean, are there pitfalls here? So it's a good question. And you're right to bring up the sort of parallel with Huawei and 5G.

And what was interesting there was the U.S. move to ban it. And then it put pressure on allies to also move off of Huawei equipment. That could play out in terms of AI model access as well. As to concerns, I mean, right now, a lot of these Chinese models, the top performing ones, they're already hosted on the hyperscalor clouds like AWS, Google Cloud, and Azure. people seem comfortable with using it. There is this idea of a wake word, or I think technically it's called a sleeper cell, where if a user says something, it kind of creates this back door for the Chinese to come in

and get data or whatever it is. There is that fear. I don't think that it's ever been proven, but that is there. And that's what lawmakers may rely on. It also may just be to protect our own American AI companies, Anthropic and Open AI. And that's where sort of Anthropic has been positioning anyway, saying that the stakes are so high. security is so important that you have to sort of protect. But as you guys know, when it comes to costs, right, companies are more willing to experiment and maybe loosen standards if you're not

in a critically sensitive industry. That being the case, Dee, I wonder, is there not a movement to domestically develop some of these lower cost, you know, open source models? Because it would seem as if that would be a pretty good shortcut. Yes. I mean, a lot of folks in the industry have been saying that for years, and you do have OpenAI and Google Gemini have open source models, but they don't really go anywhere in terms of adoption or the benchmarks. The ones that are really good are the Chinese ones. Now, looking ahead, Nvidia has made open source a major sort of focus. It has its Nemotron family of models that I hear from people in the industry are pretty good, still not at the Chinese level, but they're working on it. There's another startup called Reflection

AI that may be working on this, but that is sort of exactly what folks are talking about right now, we need a Chinese open source alternative. Deidre, thank you. Deirdre Bosa. Thanks. Palantir, one of the top performing S&P stocks in 2025, but it's been a completely different story this year. Up next, we'll take a look at what is going on and what it says about the broader software space. Closing Bell Overtime, live from the NASAC market site. Be right back. Welcome back to Overtime. It's been a rough ride for software stocks this year. The IGVETF is down nearly 15%, but Palantir, the third largest holding in that fund is down roughly 35%. The group as a whole has been hit by AI disruption fears, and that's especially true for

Palantir, since AI models are increasingly able to handle complex data analytics. And despite its sell-off this year, the stock still trades at a very high price-to-earnings ratio, around 73, maybe it's 65 if you have a bigger number for next year. To me, it's also about how much air was underneath each of these stocks before the decline started. So Palantir, obviously, skyscraping valuation. Once the war started, there was a lot of post-election enthusiasm about their place in the world. Right. But then you take a look at a Microsoft, which you mentioned before, and it's on pace for its worst months since 2008. Exactly. So there's a lot of fears in this entire space, which persist about AI disruption overall,

even though Palantir today was up because of a partnership with Nvidia. Yes. For AI. They're grasping for, you know, obviously relevance in the moment. And I think a lot of the most Lagerd stocks had the biggest bounces today. That's something you have to keep in mind. So a lot of these rebounds in software, been a little bit untrustworthy along the way. So we'll have to see also. There was a story last week about Pallantier hiring Democratic lobbyists, just in case Congress changes. So lots of moving parts here. That's going to do it for overtime today. Fast money begins right after this quick break.