Closing Bell - Closing Bell Overtime: AI Trade at Risk? 9/25/25

Episode Date: September 25, 2025

As a government shutdown looms, Barbara Doran of BD8 Capital and Kevin Gordon of Schwab weigh in on markets against stronger-than-expected economic data. Emily Wilkins reports on whether mass federal firings are really possible, while Eamon Javers digs into the latest TikTok deal developments.On the corporate front, Melissa Repko breaks down Costco earnings, TD Cowen analyst Andrew Charles joins on Starbucks job cuts, and Okta CEO Todd McKinnon shares his outlook. Sara Malik of Nuveen debates whether the AI trade is showing shades of the dot-com bubble, and Mike Ozanian details the Patriots’  stake sale to private equity firm Sixth Street. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The bell marks the end of regulation. Tetra technology is ringing the close about the New York Stock Exchange. Try hard holdings, through the honors at the NADDAQ and stocks are lower. Once again, the major averages down for the third straight day. Shares of Apple gaining, though, heating their highest levels of the year. Apples within just a few bucks of the all-time high from last Christmas. Health care, consumer discretionary, and materials leading the way lower, energy, the one sector in the green.

And bond yields, mostly higher, following GDP, coming in better than consensus, consensus, also fewer than expected jobless claims in the latest week. Gold's flat, but the retreat continuing in crypto, ether now down 15% in a week. Well, that's the scorecard on Wall Street. Welcome to closing bell overtime. I'm Morgan Brennan, along with John Ford. Coming up on overtime, we will get results from Costco. This is always a key consumer company to watch. We'll bring you those numbers as soon as they are released. And we'll also hear from the CEO of Octa as the company We host its annual Octane conference. And Starbucks to cut more jobs, close more locations.

Is this just a necessary part of the turnaround effort? Or are bigger problems percolating? Well, let's start with that third straight-down day for the major averages, some of the hottest parts of the market leading the cool down. Christina Parts of Nevelas here with the details. Christina. Well, like you said, stocks did closing the red for the fourth straight day with every sector finishing lower except energy,

which continues really bucking the broader trend. The AI trend is really the unwinding. really without any catalyst, a topic of conversation. Most of the Magnificent Seven fell with Tesla closing near session lows. Apple, you mentioned it, the lone bright spot in the green today, almost 2% higher. Oracle, though, let's talk about Oracle. They tumbled about 5% after announcing it needed to issue corporate debt. Its second biggest bond sale this year to fund what we would assume is AI infrastructure.

Also Rothschild Co. and Redburn note, also adding pressure analysts call for a sell arguing. investors are just overestimating the value of Oracle's contracted cloud revenue. I wanted to bring up Intel because they closed about 8% higher, almost 9% on a report that it not only approached Apple, but now TSMC about investing in the chipmaker. TSM told me they're not commenting. Additionally, there was a report from Asia saying Intel plans to raise prices of its processors by more than 10%, which definitely helped the rally. Electronic supplier Jabal dropped about 6% despite beating fourth quarter earnings estimates and issuing better than expected guidance for current fiscal year. And then last but not least, nuclear power startup Aklo has plunged 9% today and 16% over the last two days as executives really dump shares and Goldman initiates

coverage with the neutral rating, warning that valuations look pretty stretched. Goldman sees another 11% downside. They're saying at least the stock will go to hit 117. It's at 119 today setting concerns over the company's business strategy that needs de-risking amid the wave of insider selling guys. Morgan? All right. Yeah, I think big theme today. We're seeing some of the air come out of some of these momentum trades. You could add crypto to that list, too. Christina Parts and Hevelas, thank you.

Bond yields moving higher today after better than expected GDP reading. Let's get to Rick Santelli in Chicago for more. Hi, Rick. Hi, indeed. It was a big day if you're looking at data, and the yield curve gives you big clues. Let's first look at durable good to order. I'm sorry, let's first look at initial jobless claims. 218,000.

That's the smallest number of claims going back to me. July. And as you look at that chart, it's easy to see what's going on. They've been very well behaved outside of one week, about three weeks ago, and that number from Texas that shot it up to that 260 level was very questionable. And how did it play out? And here's the key. Look at twos and tens together on the chart. This starts on the day the Fed ease. And you can see what's happening there. Interest rates have gone up. And today in particular, two-year yields are up twice as much as 10-year yields. What's the yield curve telling us as it flattens? It's telling us that two-year notes took it on the chin harder, selling deeper,

raising its yield higher because of the implications of strong economy and lower initial claims may have on the Fed, which has really highlighted the weakness in the labor market. And the long end, while its yields were up, but maybe not as much, but the long end should be paying more attention to better data. And if better data ultimately wins out the disappointment for a more aggressive Fed ease, the yield curve should steepen. Right now, two years are on pace for the highest yield close in about a month, the 26th of August, whereas 10s, that's a month to date chart. Should they close here? We'll be a three-week high yield close. Pay particularly close attention to 50 on the 2's 10 spread currently at 51. It's one month high at 64. John,

All right, 50. We'll watch it. Rick, thanks. While this morning's GDP report and jobless claims number, both giving positive signals for the economy, but looming over the markets a potential government shutdown. With it, a new wrinkle in negotiations. Our Emily Wilkins has the latest from Washington. Emily. Hey, John. Well, yeah, look, the White House, they've raised the stakes for a government shutdown, saying that massive layoffs will occur if more government funding isn't authorized by next Tuesday. But so far, Democrats seem to be holding firm on their pledge to only back a funding extension if it includes measures on health care. That pressure doesn't seem to be working yet.

Top Senate Democrat, Chuck Schumer called the Trump administration's threat to fire what could really amount to hundreds of thousands of workers and intimidation tactics, noting that some workers who were removed by Doge earlier this year, they've already been asked to come back to work. And House Democratic leader, Hakeem Jeffries, said today that Democrats need to see at least some provision to, either expand health care or roll back some of the Medicaid cuts that were part of Trump's mega bill. The Republican assault on health care in the United States of America has been unprecedented and unrelenting. It's an assault on the health care of working class America, an assault on the health care of rural America, an assault on the health care of urban America.

The House already passed the GOP bill to continue current government funding levels for another seven weeks. That gives lawmakers time to hash out the further details for fiscal 2026 funding. So now everything is in the Senate's court. And remember there, you have to have at least seven Democrats who are going to have to join Republicans to support it for passage. And guys, at this point, it's just not clear that those numbers are there. Morgan, all right. Clock's tick into Tuesday night, or maybe I should say Wednesday morning. Emily Wilkins, thank you.

Stocks falling today. That makes three sessions in a row, even as we got some better than expected economic data. But as Emily just told us, that shutdown is hanging out, out there. So will this pull back grown to something large, or is this just a temporary blip? BD8 Capital Partner CEO, Barbara Duran, and Charles Schwab's senior investment strategist, Kevin Gordon. Join us now to discuss. It's great to have you both here, Barb. I will start with you.

Wall of worry, do you see this as just kind of boilerplate consolidation for a market that's had a torrid run and is looking pretty expensive here? or the start of something larger in terms of a pullback. Yeah, Morgan, I think it's boilerplate. I mean, we've seen this before. When the market's had a big run, and certainly I would not have been surprised if we'd had a pullback a few weeks ago because the valuation has been stretched.

We are now at 23.6 or 0.7 valuation on next year's earnings. So the market is incorporated a lot. It's earnings at somewhere at 13 to 14% next year. They're projecting the Fed will continue to cut, although I think that is an issue, given the economic strength that we saw in the jobless claims this morning, which as Rick pointed out earlier, you know, makes the, we'll make the Fed question, how weak is the labor market. So, but I think it's a blip given the earnings support, and I think all the

AI infrastructure activity, and certainly this week we had a number of deals announced, particularly around open AI, billions and billions, with some estimates that we could be spending or could be $7 trillion spent by 2030 on these kind of infrastructure. So I think that gets investors excited about the potential earnings and the productivity increases we're going to see. So I think this is going to be a buy on any pullback, you know, situation. And certainly we've seen, we have not even seen 2% pullbacks in the S&P since April. Yeah. And that's a good point.

The final GDP number, Q2 GDP number, Kevin, much stronger than expected. Stronger consumer spending, which seems to be the headline from the report we got this morning. If I look at your notes, you talk about the stock market as the next big economic driver. Let's break it down. Yeah, I mean, a lot of that comes from, you know, the most recent data that we've gotten from, the Fed. As of the second quarter, you look at stocks as a percentage of household financial assets, then they rose to an all-time high, you know, surpassing what we've seen in the past several years and surpassing what you saw, you know, at the prior peak in March of 2000.

So in and of itself, you know, that's seen as some of a worrisome signal. We're not necessarily in that camp. Well, we do think that, you know, behaviorally, that does suggest that things are pretty stretched from a sentiment standpoint. But when you think about, you know, the wealth effect being a bigger driver now because of that stock exposure, but you also lay on to that, the weakness in the labor market, the fact that that has disproportionately hit, you know, people down the income and the wealth spectrum, a lot of the spending being driven, increasingly driven by wealthier parts of, you know, cohorts of the economy, you can see how the market becomes, you know, a bigger driver of that. So I don't think that, you know,

weakness today or this week necessarily means that we're going to start seeing weak economic data. I think you would need to see, you know, much more of a protracted sell-off, maybe not as much in terms of depth, but I think also in terms of duration, which in the post-pandemic era we really haven't seen in a bare market. So I think that will become, you know, assuming it stays that way in terms of household exposure to equities, that probably becomes more of a significant economic driver over time. Okay. Barb, what do you make of this relay race effect that we see among some of the big tech stocks? We see Nvidia, Oracle, cooling off a bit after they've run recently. But Apple picking it up and running, what does that tell you about the health of the market

overall and tech. Well, you know, I think there's always a concern when you see people piling in, you know, are things going to get overbuilt when you've got every player coming in? Because we've seen this in other industries, other times. You know, the pricing is so attractive. People rush in and before you know, you're at overcapacity. But I think in this case, it really is different. You know, that this, the market size is so huge because you're still seeing companies adopting.

You're seeing sovereigns. It is just spreading. And as costs do come down, and we do figure out the power energy needs and how to accommodate that, you will see it becoming much more widespread. And certainly you're starting to hear a lot of companies figuring it out, whether it's through their agenics, you know, how to maximize the efficiency, the automation, the digitization in their companies. So I think this has, this is such a big market that this is, I think it really reflects on the

size and the power and the duration of what we're going to, lies ahead. But Kevin, at the same time, as we see so much. many of the biggest players that have the biggest influence on the markets locked up in this AI story, does it make concentration risk more of an issue? I mean, if there is some sort of stumble in the AI narrative, even if it all eventually turns out okay, is that likely to have a bigger impact on the market than historical because so many of the bigger names are such a big piece of this? Yeah, I mean, mathematically, if you look at a cap-weighted index, you know, whether it's

CS of P 500, whether it's the Russell 1000, I mean, you can take your pick. Yes, the math would just suggest that as long as those companies continue to grow, you know, their contributions to the indexes will also grow. But that also works in both ways. I mean, you know, memories tend to be short sometimes. You just have to look back to the bear market in 2022, and a lot of that weakness was driven by the Mag 7 or the tech sector or comm services. If you took those out, you know, the broader market, yes, it still went down,

but your gain would, your loss wouldn't have been as severe. Of course, that worked to the opposite direction in the bull market that we've been in since then. So I think it's important to keep in mind, especially from an individual retail investor perspective, you know, those investors do not have to benchmark to the S&P. They don't have to have the same kind of makeup as any particular index. So when you think about ways to diversify around some of that concentration risk, this is a really good environment to do that because there are dozens of companies that are, and in some cases, hundreds of companies in the S&P 500 that are outperforming that.

the MAG-7 and that are outperforming the largest names in that index. So you as an individual investor don't have to do what a lot of institutions have to do in terms of figuring out how to benchmark yourself and follow those kinds of rules, that I think works to the benefit for anybody who has more of an active mindset in this market right now. All right, duly noted. Kevin, Barb, thank you. Thank you. Well, let's get some more perhaps on this evolving TikTok deal. Let's get to Eamon Jabbers in Washington. Amen.

Yeah, John, we're just perhaps moment. away from seeing this on camera. The president is expected to sign an executive order related to this ongoing effort to buy TikTok this afternoon. We think cameras are going in here very shortly, so we'll keep an eye on that when that does happen. It's not entirely clear what we're going to see here. We don't know if any Chinese representatives of Bite Dance, for example, the company that would be selling or if any of the American investors who would be buying will be in the room, so we'll watch for that. We also don't have a purchase price yet, and we don't have any indication that the Chinese have made the changes to their law that would be necessary to transfer

the underlying TikTok assets. So we don't have a full list of investors here either, but we did get some new names from David Fabers reporting today that the main group of investors will be Oracle, Silver Lake, and Abu Dhabi-based MGX, and they'll control a combined 45% of the new U.S. company. Now, what I'm told this executive order is going to do, guys, is to assert that the deal that's being contemplated here would be compliant with U.S. law on TikTok and therefore would satisfy key national security concerns. President Trump has said in just about every recent public discussion of TikTok just how much he likes the service, how valuable it was to his campaign and how much he wants it to keep operating. We'll watch to see if he says that again.

But against this backdrop of the broader U.S.-China economic negotiations, guys, it's not clear if that eagerness by the president makes the Chinese side more or less likely to want to complete the deal in a timely manner. Back over to you guys. I think it's so fascinating that we're talking about executive order today. It almost makes me the things about some of the trade deals that we've seen announced where it's like the deal. Like we have a deal and that's been announced, but then the actual details of the deal, the guidelines of the deal, let alone the actual signing of said deal, come much, much later. So is that the way we should think about this too, especially when investors are watching this so closely to get any kind of indication that a big, bigger trade deal with China could be next?

Yeah, I mean, I think it's been a very slow curtain raiser here on this deal, as we've gotten a little bit more information. We had the president a week ago on Friday saying that, you know, the Chinese government had approved the transfer of the assets, and then we got a little bit of detail from the White House earlier this week on what this deal might look like. Now we'll see this executive order, which is asserting that the deal will comply with U.S. law. What we haven't seen is, you know, an actual signing where assets are.

are actually transferred. So, you know, we'll watch for that. But until you've got a willing seller in the room willing to sell the asset, it kind of doesn't matter how many buyers do you have or how much they're willing to pay. I mean, a lot of folks are curious, who's in this deal, all told,

who are these other investors? We don't know that list. And then what's the purchase price here? We don't have really any idea of that either. So there's some really big key pieces of this that are still missing. Okay, well, we know you'll be watching and bringing us at any headlines as they come.

Amin Javers in Washington, thank you. Coming up, Costco earnings are out. We have those numbers for you next. And on the other end of the retail spectrum, Starbucks struggles continue. The company cutting jobs, closing stores. We're going to check in on CEO Brian Nichols' turnaround plan. Is it starting to work or is there more pain ahead? Overtime's back in two.

Welcome back to overtime. Costco earnings are out. Melissa Repco has the numbers. Melissa. Hey, John. So Costco shares are. down slightly despite the retailer beating on the top and bottom line. It reported earnings per share of $5.87 versus the $5.80 expected by the street. On the revenue side, it reported $86.1,6 billion

compared with the $86.06 billion expected. It's worth noting that Costco's shares are up significantly if you look over the past five years. And so it has become a tougher sell for investors because of that high valuation. I'll be listening for more details on the earnings call, particularly what's going on with membership income trends and with discretionary merchandise, John. All right. Melissa, thank you. Thanks. One of the wackiest stories this week, Iranian diplomats being barred by the U.S. from shopping at Costco while visiting for UN General Assembly. Well, sticking with the consumer, shares of Starbucks closing in the red, but off the worst levels of the day,

the company announcing a $1 billion restructuring plan, investors cooling on Starbucks this year more generally, It's one of the worst staples performers in 2025, but joining us now for more is Andrew Charles. T.D. Cowan, senior equity analyst. He has a neutral rating on Starbucks. joins us here on set. Welcome. Thank you. What did you think of the announcement today? You know, I think it didn't really change anybody's mind. If you were bullish going into this, they had hinted to this before, and this just puts more numbers around the number of store closures, as well as some of the restructuring charges as well. If you're bearish, you're looking at saying, hey, this is a little bit more of a larger magnitude than we expected, ourselves included.

You know, we're seeing that 900 jobs unfortunately lost, around 500 store closures in the United States. You know, this turnaround obviously is these are necessary actions to take, but the turnaround obviously is ongoing. So when you hear about this back to Starbucks strategy, this is just one more piece of that in the Brian Nicol, I guess, vision here? How similar is it to Chipotle? It's different. I mean, the issues facing both companies were quite different. So, you know, Chipotle had one massive issue around food safety. The Starbucks has, call it, five or so medium-sized issues just around the culture and making the operations better.

And so, you know, the first year of Brian's job in the role, I mean, very important that he focused on getting the house in order, making sure operations were better. You know, now they're starting to go more on offense. And this is where it's really crunch time for the company as investors are looking to see signs of improved sales performance. You know, we just had the green apron roll out with all the increased labor and increased staffing behind the counter. We're going to get protein coffee in the month. So investors are looking at right now as the crunch time to see our sales is going to pick the. The part of this announcement I'm most curious about is the idea that they're going to close stores that aren't designed in a way that fits their ongoing strategy. And I wonder if you have a sense of what that means.

Is this a return of that sort of third place idea where they need more or different types of room for hospitality? What are they closing and what should investors take away from that? You know, it's not a one-size answer. So there's a Starbucks Go concept that was only for pickup. They announced that they're going to close those stores as part of it. Clearly, there were some stores that were just seen as cash flow losers or just financial underperformers. They got rid of those as well.

But to your question, you know, there's going to be ones that, hey, the space didn't fit, the vibe wasn't right. These stores were also closed. But the whole goal here is obviously to close the underperformers to improve the financial performance and make 2026, you know, off to a better start between same store sales and margins from closing these stores. Is food a part of this at all? Or should we think differently in terms of things like the protein shakes, which are potentially

a higher margin contributor? looking to sell more, looking to get a bigger share of wallet? Food's going to be a piece of it. Beverage is critical, given the margin, as well as given the habitual nature of it. And so getting beverage right, making sure they have the most relevant offers, going more on offense, you know, with innovation. You know, historically, Starbucks didn't do great in the last year or so with some of the menu launches they've had on the beverage side.

And so making sure they're doing things that are going to be better for the consumer and really drive traffic more. And food's going to be a piece of it as well. You know, they obviously want to build attachment given about 40% of people attach food. It's about 20% of their sales. but lower margin, it's key to get that beverage, especially to get the habit in. All right. Andrew Charles from TD Count. Thank you. Thank you.

Well, coming up, Mike Santoli will be here with a new look at just how disconnected the market is right now. And the New England Patriots, the latest team to take advantage of the NFL allowing private equity investors. Who's buying? How much are the Patriots worth now? You're going to want to hear those stats. That's coming up on overtime. Welcome back. Shares of Eli Lilly following today as the company halted the trial studying a drug which aimed to prevent obesity patients from losing too much muscle.

The stock is down more than 7% this year. It's on track for its first losing year since 2016. And you could see finish down about 3.5% today. Yeah. All right. Now let's bring in senior markets commentator Mike Santoli for a look at whether this could be a stock pickers market. You know, we've actually been in one, John. whether it feels like it or not, at least as determined by the fact that stocks are kind of very

differentiated in how they're behaving and how they're performing. This is the same 100 stocks in both of these indexes. The NASDAQ 100. The top one is, of course, weighted by market value. The bottom, NDXE is equal weighted. So you see starting, especially in the summer, the market cap weighted index, the mega cap started to really lift off and market breadth started to become a little bit more two-sided. Now, take a look at this other statistical way of talking about this, is the correlation, the realized correlation among S&P 500 components. When it's low, it means stocks are going their own direction. They're not moving in unison.

When it's high, it often means you're in a moment of severe market stress, right? You kind of sell everything or you buy everything in those times. And this looks like basically a decade low. You can go back to periods such as 2017, when you had its really clockwork rally during 2017. And then in the early 2018, it kind of blew loose. you had this big volatility eruption. So it's good in the sense if you want to pick one stock over another. It doesn't make it easy to pick the right ones, but at least you have the ability to outperform

the index. On the other hand, this often means volatility is about to pick up, and maybe the stock market at the index level is going to have potentially a tougher go. Is there really any such thing as a stock picker's market anymore? I ask that as somebody who work at CNBC. We can't pick stocks. I've been in the S&P 500 for decades, and I'm very happy right now. that I can't pick individual stocks, especially given all the ETSs that have come to play.

How do we think about what a stock picker's market even means? What it really means to me is that an active stock picker that believes he or she has an edge can actually exploit that or at least tested in the market and have the ability to have your stocks move differently than the underlying index. In general, in aggregate, we can't be all stock pickers, at least successful ones, because in aggregate, we all own the market, and, you know, you have to pay taxes and fees, and that by definition means you underperform. That was Jack Bogle's insight.

And, you know, indexing basically just minimizes your possibility of underperforming. It doesn't mean that it's always the perfect way to go. Indeed. All right. Mike, we'll see a little bit later this hour. It's time now for a SanBC News Update with Bertha Coombs. Hi, Bertha. Hi, Morgan.

Officials say the suspect in the immigration facility shooting in Dallas, yesterday wanted to kill federal agents. FBI director Kosh Patel said earlier this afternoon, the gunman left behind a note that said he hoped the attack would, quote, give ICE agents real terror. The 29-year-old suspect killed at least one detainee before taking his own life. The survivors and relatives of the victims of the 2023 shooting at a main bowling alley refiled their lawsuit against the federal government this week, citing a new Pentagon watchdog report that found the Army consistently failed to make mandatory reports of violent threats by service members. They argue the Army could have stopped reservist Robert Card from shooting

and killing 18 people. And the Justice Department is suing six additional states, including New York and California, for failing to provide their voter registration lists. It sued Oregon and Maine last week. The DOJ said today, the Attorney General can lawfully demand voter registration to make sure they are accurate and secure. Morgan. All right, Bertha Coombs, thank you. Well, stocks down for the third straight day. High Flying Oracle losing more than 10% of its value since Tuesday.

Is this just a natural breather for names which have had a big run? Or is it the start of a bigger pullback in the much hyped AI space? Well, over time, we'll be right back. Welcome back to overtime. Stocks falling for the third straight day. Losses of exactly half a percent for the S&P 500 and the NASDAQ. Costco reporting its results, beating on both earnings and revenue, $86 billion in just three months. That's sales and membership fees.

Sales of concentrics, though, getting hit hard after hours. The tech and services company missing on earnings by $0.9 per share. But the fourth quarter guidance predicting. an even bigger miss compared to the estimate. You can see those shares are down 21% right now. Yeah. Well, tech stocks are falling for the third straight day, with air particularly coming out of some of the hottest AI-related names. Oracle down more than 5% today after Ross Child initiated the stock at a sell. Other names with big AI run-ups, also seeing declines. That includes chip stocks like Bicron and also energy names like Oklo and manufacturer J-Bell,

even though the company issued bullish guidance. The CEO says he continues to see robust AI demand. Here's what Citadel CEO, Ken Griffin, had to say about whether AI valuations have gone too far. 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. Radically and in very positive ways. We're just mapping that out here on overtime. Griffin says the same could be true now. We don't yet know who the AI winners and losers might be. Joining us now is Neuven's chief investment officer, Sarah Malik. Sarah, good to see you. So even though the internet turned out to actually be this world-changing thing

that investors in the late 90s and 2000 hoped, we went through this trough of disillusionment when Amazon was trading at this huge discount. How do we tell if the same's coming for AI? Well, tech tends to lead the market up, so it's going to lead the market down. And I think what investors are wondering is what's next after the Fed finally cut interest rates for the first time this year a couple of weeks ago. And the market is concerned about three factors. That's the rate of inflation, economic growth, and the pace of Fed, rate cuts going forward. With inflation, likely to remain sticky, we'll see that with PCE data

tomorrow. Economic growth is slowing. We're seeing that with the employment markets. And so if you look at technology stocks, they have a premium valuation, but AI in general is alive and well. We're seeing very strong growth there. And companies like Avago and Alphabet are leaders in this space, and they will continue to be because of their strong earnings growth and the investment being made in artificial intelligence. So give the viewers some practical strategy advice. How should you position yourself if you do believe that AI is great for the long term, but you also want to protect for near-turned downside and volatility?

Well, you can balance your portfolio. So just looking at, first of all, Avago and Alphabet, both of these companies are positioned very well. With Avago, they have huge demand from hyperscalers for their A6 chips, very strong management a team, ability to earn a very strong earnings growth going forward. The stock actually is not as expensive as one might think, given its earnings growth trajectory. Looking at Alphabet, people are worried about what will the impact of Open AI be on Google's advertising business and Genesis. I think the impact is not going to be as great as people think, and you have

the upside from Waymo and their YouTube business. So if you're looking at AI, you want to own the companies that will be winners over the long term, which were the two I just talked about, And then you can balance that. We are seeing the market broaden out a bit. So there's areas like infrastructure, which has its own tailwinds. It is a data center place. We build more of those in the U.S., but as we need to electrify our grids, part of infrastructure is utilities. So we're going to need more and more upgrades to our utilities.

And then, of course, waste management is a big component of infrastructure. So it's a sector that tends to be a little bit more defensive and an inflation hedge. So you can offset some of your tech picks. with areas that are more defensive like infrastructure. Sarah, we had so many Fed speakers making so many comments this week. And stagflation or concerns around stagflation, especially as we look to the PCE report tomorrow, seem to be what's in the ethers here.

So does the market continue to broaden if that actually becomes realized? Well, why the market's been mixed recently is because now that we've gotten that first rate cut under our belt, what are we going to see in terms of the pace of rate cuts going forward? Our estimates is for three more rate cuts in the next 12 months. Now, I don't know if that's going to be one or two in 2025 or if it's going to be in the next calendar year. So that's going to be one issue. Now, on the stagflation debate, the issue around that is the employment markets. We have seen payrolls significantly slow over the past few months with revisions also declining significantly.

It's going to be crucial to continue to watch the payrolls in employment markets because recessions tend to start as employment markets crack. I don't think we're at that point yet. You saw GDP today. The economy actually is still doing quite well. So a recession isn't imminent. But if you hit that point where the economy slows enough because of the employment markets and inflation is still sticky around 3%. That is going to be a period of stagnation.

But I don't see us in that category at this time. Okay. Sounds good. Sarah Malick. Great to have you on. Nice to see you. Well, let's make a deal. The New England Patriots reportedly selling a stake to a pair of private equity firms.

Up next, a closer look at how Wall Street is trying to cash in on the NFL's success. And later, the CEO of Octa on how the cybersecurity firm is trying to make sure AI agents are safe for the company's using them. Be right back. Got that breaking news on TikTok. President Trump speaking from the Oval Office. Amen Javours has details. Amen. TikTok deal that's being contemplated here does comply with U.S. law and satisfies national security

concerns. But as he was discussing the deal, we got a couple of new details about what's envisioned here, including a new total valuation that the vice president gave in the Oval Office just a short time ago. Take a listen. The company will be valued around $14 billion. We actually think this is a good deal for investors, but ultimately the investors are going to make the determination about what they want to invest in and what they think is a proper value. The most important thing is that it does protect Americans' data security and ensures TikTok is still accessible. And on this question of the algorithm, which we've heard this a lot, what this deal ensures is that the American entity and the American investors will actually control the algorithm.

And the president also said that he's not going to ask for any kind of magification of TikTok, I guess for lack of a better word. He won't ask for the new owners to put any spin on the ball in terms of what the algorithm represents. He sort of does. danced around and didn't directly address a question, guys, on whether or not the United States is going to take a revenue stream from the new TikTok U.S. So that one seems to be open for maybe a future announcement. He said we'll be announcing some things in the future. So we're still missing a couple pieces here, including a complete list of who all the investors are who are investing in this now, $14 billion deal for TikTok U.S. guys. Back over to you.

Very quickly. $14 billion? That's what the vice president said. Yeah. Wow. That's the valuation. know exactly how much the investors are putting up. Gotcha. Amen Jabbers. Thank you. I think bite dance's valuation at one point was around 330 billion, so one wonders how they're

calculating that. All right. I guess we need more details. Devils in the details here. Well, shifting gears in terms of deals, New England Patriots are reportedly selling a nearly 10% stake in the team to a pair of private equity firms. Let's bring in CNBC senior sports reporter Mike Ozanian for more. Mike. Yeah, this is a really rich valuation, Morgan. Robert Kraft, who owns the team is selling 8% at a $9 billion valuation. And just two quick things, I think, are important I'd like to point out.

Number one is, if you look at the revenue multiple of this deal, it's a little over 11 times revenue, which if you go back to two years ago when the commanders were sold, that was a control stake. That was also a little bit over 11 times revenue. So we've seen that discount for minority stakes in NFL teams

versus the control stake shrink. And the second thing, this is the issuance of primary shares. In other words, this isn't Robert Kraft selling his shares in the Patriots. These are new shares, which means that the money that comes in, several hundred million dollars are going to go right into the Patriots balance sheet. So that's a lot of cash they're going to have, you know, to invest in Gillette Stadium, which they own, to use for operations, pay down debt. And in the NFL, when you sign a player to a guaranteed contract, the outears of that guaranteed contract, the money has to be put in escrow.

So if they sign a high-priced player to a lot of guaranteed money, they'll have more cash to put in escrow. So how does this work? Because when I was growing up, the Patriots stank. And then there was Tom Brady, and now Tom Brady's gone. And the Patriots kind of stink again. And you look at the Dallas Cowboys, it seems like the correlation, unlike stocks, the correlation between performance and value is not necessarily there.

So why are the Patriots worth so much? Well, a few reasons, John. Number one is in the NFL, all teams share equally about two-thirds of revenue. So performance doesn't necessarily equate to revenue. Number two is the Patriots own their stadium. So they also get a lot of money from concerts. They also own the New England Revolution of Major League Soccer, which this deal does not include. So they earn money at the stadium from that.

They do a great job with sponsorships. Look, the Patriots still sell out every game. You know, I don't know how long that's going to last if they don't keep winning. but they do. And their fan base is so loyal, they have their premium ticket price. Those are those fancy club seats. They have the highest price premium club seats in the NFL at about $630. So their fans are still paying up to go to the games.

Yeah, I had a private equity guy tell me maybe last year before this was opened up. The NFL was opened up to alternative investors. So you've got to think about this like real estate or like hard investments. There's basically a fixed number of teams. And that's how they look at it and look at investing in it. So I guess it raises the question when you do open up the NFL and the teams to these types of investors to come in, what is it already doing to valuations? And is there a point at which this peaks?

Well, I don't think it's going to peak soon because, as our Alex Sherman has pointed out, the NFL's media rights are way undervalued, particularly when you contrast to what the NBA got for their new media rights deal. So you're going to see a big increase. in media rights for the NFL at some point. And number two is you mentioned real estate. Well, that's one of the things Kraft has done a great job with. He's got Patriot Place right near the stadium. So it sort of becomes this place where people can come all you around and go to Patriots

Hall of Fame and all that stuff. And then, yeah, 32 teams. Welcome to the party. You know, it's a limited club. All right. Mike Ozanion. Thank you. Thank you.

Starbucks needs concerts. All right. Well, up next, the CEO of cybersecurity firm Octa on his company's new tools. hoping to ensure AI agents aren't creating new vulnerabilities for companies. And later, Mike Santoli is back. He's looking at whether the charts show the market is at a near-term inflection point. Stay with us. Welcome back to overtime.

Cybersecurity firm, Octa, unveiling Octa for AI agents at its Octane conference today. The challenge I spoke about with CEO Todd McKinnon, corralling all of these thinking software agents empowered by AI and making sure they don't open up new vulnerabilities. With this management-driven rush to adopt AI, lots of companies are blundering. Once you see the prototype working, John, what does the boss say? The boss says, get it out there. Automate this process, and there's no good patterns and not a lot of good standards and frameworks to actually move that in a way that's secure and the connections are managed and monitored. And you see some of these things that seem like obvious mistakes, but when teams are

under pressure like this, it's kind of, I mean, it's not that surprising that it happened. So we're trying to elevate the whole industry to have a better way to do this. I'll picture agents as a whole software army of employees scurrying around a building, keying into different rooms and computers to get work done. Octa wants to create new ways to control which systems those agents can access for how long, and it's got to be coded into the way the agents are designed. So when people are building these agents, they're hard coding these access control rules, inside of the agent, which may work in prototyping environment, but once they're moved to production,

it's problematic because if something goes wrong, if the agent acts in a way that's not predicted or does something that's unforeseen, then it's left to the IT and security teams to clean it up. And guess what? It's not clear how those access rules are specified, what the path of control of the agent was. So we've proposed a new standard to actually make that consistent across all agents. And we're working with many leading technology companies to get this standard widely adopted, basically make it more clear and transparent how these agents are secured and what they're connecting to. Makes me wonder, 15 years from now, we'll have agents from basically zombie companies running around doing things like sentient geo-cities and AOL accounts. We've got to protect against

that. All right. We'll have to see. Well, up next, Mike Santoli breaks down the charts to look at whether small caps and treasuries could be indicating an inflection point in this market. Shares of Google Parent Alphabet are higher in over time. The information reporting META is in talks with the company to use Google Gemini to improve ad targeting. Previous reports said META was considering open AI along with Google as META works to improve its own AI tools. Yeah, well, just add it to the mix of partnerships and deals that have been happening. happening here in the AI space. Well, Mike Santoli is back. He's got to look at some asset classes that could face near-term inflection points. Could. They're at interesting spots, if nothing else,

and they've maybe reversed from those levels. Take a look at the Russell 2000 on a five-year basis. It has backed off. It's down 1% or so today. And it's been those three highs from late 2021 and then December of last year and then just last week are all within half a percent of one another at 2435 to 2450 or thereabouts. So it's not to say that that's decisive and that we've somehow, a lot of people will say, oh, there's not just things as a triple top, but it's worth keeping an eye on as rates kind of go against, meaning 10-year yields go against the Russell 2000. Another one, and this is all related, is the U.S. Dollar Index, also on a five-year basis.

It does look like it's kind of found a little bit of support here. That's a little bit less decisive than the others. But you see it's gone back to those levels from right before the surge. that was, you know, around the Ukraine war invasion. And so, again, this is the market sort of taking out maybe some anticipated Fed rate cuts that we thought were going to be there just a week ago. This can change a lot. But it does maybe suggest a turning of the tide.

And then finally, the 10-year treasury yield, which looks, again, like it's hit the 4% level twice within a few months, has bounced off of that. This is a two-year chart. And so those lows are below 4%. But just this year, it's hit four and gone above. I don't think that's a danger move at this point because you're still at these really benign levels. You know, you've got to really get well above four and a quarter before it impinges. But you did see Home Builder stocks, you know, back off today in the face of this as well as some weak existing home sales this morning.

I mean, we saw this breakdown in the correlation between the dollar and treasure yields on the heels of, you know, all the trade stuff exploding into the marketplace back in April. So when you look at those two charts, could this also just be, I guess, a realignment? or a normalizing of the relationships between those two asset classes? To a degree, yeah. I mean, I don't even know if they're necessarily have been going their own way, you know, every step of the way. Let's put it that way. It definitely could be.

And I think right now, if both of them are moving based on Fed expectations, right? If you have less Fed cuts, dollar up, 10-year yield, maybe up. So I think some of that is what's happening here. What I think you didn't see is, you know, sustained, like, flight from dollar assets. People are diversifying golds up, as we've talked about, but it's not so much like every single day. People are pulling it out of dollar assets. It's where the marginal dollar goes that matters more.

And so it's sort of being spread around, I think, in other places rather than just recycle back into the U.S. Is bad news now good news? Is just good news, good news? Why does it take very bad news to be bad news? I don't think bad news is good news. I think that's only in a very narrow set of circumstances when that works. but I do think that if we get a sudden evidence of re-acceleration the economy that looks reflationary,

therefore inflationary, that's going to compromise some assumptions that have been underpinning this move that this, you know, this kind of Goldilocks type move we've had that's gotten the markets to where we are now. All right. Mike Santoli. Thank you. All right. Major averages finishing the day lower, third day in a row. That does it press here at overtime. Yeah, it's been a week defined very much by AI and infrastructure related moves. Fast money starts now.