Closing Bell - Closing Bell Overtime: AI’s Grip on Markets Gets Stronger 9/21/26

Episode Date: September 21, 2026

Niles Investment Management’s Dan Niles breaks down the return of the AI trade and where he sees the next winners as competition shifts across models, infrastructure and distribution. Morgan Stanley’s Ariana Salvatore examines the policy issues surrounding the Trump-Xi meeting and the implications for AI and U.S.-China relations. J.P. Morgan Asset Management’s Stephanie Aliaga explains why true diversification away from AI is becoming harder to find as the theme spreads across markets. Plus, a look ahead to McDonald’s investor day and what it could reveal about the consumer. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The Bell is bringing in to the trendy day at the NYSC Ecolab, closing out the day and at the NASDAQ. Telx, Pharmaceutical is doing the honors. Welcome to closing bell overtime. We're live in the studio at the NASDAQ market site. I'm Melissa Lee, along with Mike Santoli. Stocks extending their gains with tech leading the way today. The Dow up 370 points, SPF a percent and a half. The NASDAQ up more than 2 percent, hitting an all-time high for the first time since early June.

The MAG-7 ETF hitting a new high as well. Meta, the biggest gainer in the group hosting its best day since May 2020. on bigger than usual volume. Semi's also in the green. The gains helping AMD join the trillion-dollar market cap club. Lower oil helping sentiment as well. Crude falling for a fourth straight day, back below $100 a barrel.

And a Bitcoin boost today as it hits the highest level since January, crossing 86,000 earlier today. We've got much more in the markets straight ahead. But let's get to the first word on the close here. And it certainly was like a risk on markets were breathing aside of relief. Let's go higher here. Without a doubt, you know, most of we talked, A lot in recent weeks about how the market was bending but not breaking.

There were parts of the market that were definitely taking on water because of what was happening with yields and oil, but not the entire tape. And today you had a lot of things releasing to the upside. I'm reminded we had John Flooded Goldman here on Friday saying people were kind of underinvested in the big NASDAQ stocks. You had some caution in there. So today was clear that people felt underinvested in the AI theme after we've had this three-month period. You mentioned NASDAQ getting to its first new high since June 4th. Well, the last S&P 500 new high was August 13th. It's kind of a first in, first out dynamic here.

Semis had a full bear market. Now they're trying to emerge out of it. So the question is whether this is really just kind of a mean reversion trade and just the same rotation happening in reverse, or if it's the start of a kind of a really new AI-driven upside move. We'll have to obviously wait on that. Except for meta, and I can't underscore this move. I mean, it is a tremendous move for a $2 trillion company, basically,

to add more than $80 billion in market cap in a single day ahead of the conference later on this week. There's so much expectations surrounding news at this point with it being top in the Apple App Store. It sort of underscores this idea that CAPX is paying off. For sure. And I think even more specifically, AI consumption now has captured investors' imagination a little bit more than the construction of core frontier AI. Also, if what we're doing is burning up a lot of the accumulated skepticism around some of these names, meta's got the most to burn. And that's why I do think the valuation reflected at.

So you see a little bit of people feeling like they were on the wrong side of that one. Yeah, and we'll talk to Dan Niles about meta specifically. In time, let's get to Christina Ports Nevelas for a look at today's movers. Christina. What, you talked about, tech really had some room to run today on lower crude and falling bond yield. Meta, big story, jumping, what, 11% as it's muse AI agent that most. Melissa just mentioned topped free U.S. iPhone downloads for a third straight day. The stock has gained, what, 34% this month, one of its best months ever,

and led the Mag 7 ETF to a second straight interdade record, the highest since the fund a Mags launched back in 2023. That muse effect spread to Shopify, which was up after its CEO unveiled Mews-powered checkout with shop pay across all of its stores. Shares were up 7%. Agenic AI in general is proving a real driver for central processing unit CPUs. the corner of the market that was supposedly left for dead within AI, and that lifted Intel, AMD, ARM, AMD, even crossing the $1 trillion market cap joining that club for a bit.

And with meta, it was good for more than 100 points on the NASDAQ index. Qualcomm, also jumping 9%, not because of meta, but after iPhone 18 Pro Max teardowns showed a Qualcomm modem in the U.S. version instead of the Apple chip that many had expected. And you talk about, you know, the size of meta and how big it is to move. InVVVIA, law of large numbers, also rose more than 2% for a fifth straight winning session, reclaiming its key 50-day moving average just last week, so joining the group, the tech group, but not everyone joined in. HPQ fell after forecasting industry-wide PC sales will drop by mid-single digits next year,

and then Moderna, jumping, I should say, 12% over excitement on its experimental cancer vaccine with Merck, and it's set for a major cancer conference soon, all those these guys. Christina, thank you. Let's turn to the bond market as yields ease around the globe. Rick Santelli is in Chicago with more on that action. Hi, Rick. Yeah, it seems like the two-year didn't get the memo, though. If you look at a two-day of two-year and ten-year U.S. yields, you can clearly see the two-year remains stubbornly high, and right now it's actually up about a third of a basis point, virtually unchanged, but not down on the day. And any yield of 4.75 or higher on the close will be a fresh high yield close going back to July of 24, a little over two years. And you're exactly right, Mike, if you look at boons, if you look at gilts, if you look at the French oat, all the 10 years, and you look at it on a two-day chart, you could clearly see that they dropped along with U.S. rates and with good reason.

Taking a bit of a breather after the U.S. Federal Reserve, of course, raised rates last week. It definitely was something that was priced by all the major economies around the globe. And the 2-10 spread right now is at 20 basis points. It's flattened five basis points today alone. With the two-year up subtly and the 10-year down five basis points, this is unbelievable. And if you look at a two-week chart, we've dropped from 43 to 20. And a little over two weeks, that is a huge move for any type of treasury spread. Back to you.

Rick, thank you, Rick Santelli. The AI trade, the leader today with semi-memory and big cap tech all rallying, the MAG-7 ETF hitting another all-time high today with Meta, the standout to the upside. The stock posting its best day since January 29th as the company's new Muse AI agent continues to gain momentum. Joining us now to discuss is Niles' investment founder and portfolio manager Dan 9. Dan, always good to see you. Good to see you too, Melissa. Did this meta move? Did that make sense to you?

100%. I mean, we wrote about this a few weeks ago in our Sunday post, and what we said was, look, meta, at the end of August, if you remember, they settled that lawsuit with the Attorney General's. And if you think all the way back to Google in 2025, when they sort of got that slap on the wrist

following the antitrust trial, I think it was September of 2025, the stock really started to work because that was a big overhang on Google. And then they released a great model. With Meta, it was similar where they settled with the Attorney General's in August. Then about two weeks ago, they put out that enterprise API, which showed, hey, here's another way we can monetize this monstrous KAPX spend, which up until now, the only thing that it benefited was our own business. Now we can sell this to enterprises. And then a week ago, they put out this thing called Muse from Meta, which was this agent. And that seemed like it had

a lot of good uptick. And meta for the last two years, if you remember last year, it was only up 13 percent. This year, I mean, even with today's move, it's only up 12 percent. So it's lagging the S&P, lagging a lot of the big cap peers. And the multiple is a market multiple. And to get back to where the rest of these companies, like a Microsoft, Google, Amazon trade, they trade in the low 20 times PE. You can still have the multiple go up a lot. And portfolio managers are underway.

And you never want to underestimate the power of performance chasing can have, especially when a stock like this is causing you performance problems. Dan, is it a matter of, you know, meta now kind of has the spotlight and people are appreciating the momentum in that story and it's going to pull from somewhere else. You know, Christine was mentioning it was really the CPU-related semis that work today. Invidia was up, but it underperformed the broad semi-group by like 300 basis points on the day. So is there still a matter of sorting the winners and losers to be done? Yeah, absolutely, Mike. And it's a great point. I mean, Intel's been a name we've been focused on for, I don't know when we first wrote about it, but our main thesis was, look, agentic AI requires a lot more

CPUs to GPO's in that ratio than what we had before. So if the ratio was 8 to 1 or 4 to 1, now that number is closer to unity. Because in an agentic world, the CPU is saying, hey, go do this first, then go do this other thing, and then put in the payment information after you've gone to, looked at all the shopping stuff, and then send the person who's running this agent an email telling you what's going on, or if there's a question, have them decide that. That's very different than processing a massive number of matrix operations for training, which is what a GPU is good for.

But this is also, don't get me wrong, if you're also thinking at the same time, you have an open source, open weight world, that's really good for NVIDIA as well, because then you get out of four guys having, you know, 20% market share each into a world where, hey, everybody has their own AI agent running internal to their corporation, and they're using an open weight model for 90% of this stuff. And so you have this market share spread amongst a lot more people that don't have the capability to build their own ASIC, then that's good for the invidias of the world. So I think you're 100% right.

You have to differentiate. That's why you've seen the processor companies triple, you know, AMD, arm, intel, give or take a little bit this year. And you've seen, obviously, semiconductors are not tripled. And neither has Nvidia, but I think Nvidia will play some catch-up as the year goes on. So if to some, to varying degrees, all of them will be successful, you are saying, though, to shift within the semi-portfolio to the ones that focus on CPUs, despite even some of the runs that we've, seen like an Intel? Yeah, Intel is a special case because one massive reason I like it is because I 100% believe the U.S. needs advanced boundary capabilities run by a U.S. company.

And Intel is the national champion. So there's another massive reason I like that name on top of, you know, what's going on. But to your point, Melissa, if you go, well, when did the GENTIC show up? We heard about this thing called OpenClaw on January 30. you've got formalized. That's, you know, what, eight, nine months ago. Well, now that was hard to set up, though, right? You had to buy a Mac Mini. You kind of have to set it all up. It's not easy. Meta Muse, that makes it pretty easy. And 3.6 billion daily active users use meta products. And so I think that makes it very simple to use. It's the same reason why hopefully when Apple

gets their stuff out of beta and gives us a really good product sitting with a foldable form factor. I think next year is going to be a huge year for Apple for that reason. And by the way, don't count Google out. I wrote about that this weekend. I think Google's going to have a frontier model coming out based on some of the things I've seen out there within the next month or two. And I think that's going to put to rest a lot of these questions of, oh, are they ever going to be at the frontier again because the person who's in the lead keeps switching in terms of who's at the lead and who's behind. And I think it's too early to count Google out.

And they have more training data than anyone on the planet with 14 products with over a billion users each. So if I'm thinking about what's the next surprise, like meta, obviously now people are catching on that, hey, Judge Dick's a real thing. I think Google could be another surprise within the course of the next month or so where people go, oh, my God, they're back to being the lead. model. And just to pan out, you know, beyond AI, Dan, I mean, we obviously got a good shakeout on the reaction to the Fed hike and a bit of a hawkish message on Wednesday of last week. You know,

we're up a few percent from that low already. But does it mean that the rest of the market outside of tech is going to have to still contend with this idea that we have a Fed chair who says he wants to tighten financial conditions and markets going to new highs and yields coming down are not part of a tightening of financial conditions? That's my problem I have with this market. I mean, if you think big picture, 10 out of the last 12 recessions have been preceded by a Fed tightening cycle. I hate those odds. And it's not just in the U.S., it's globally.

And on top of that, you've got multi-decade highs in yields all across the globe. And it gives you, for the first time, in a very long time, if you are a saver, a senior, etc., you can get 5% in 10-year treasuries. That's not a bad thing. And I would argue this is one of the first times in a long time. You've had a viable alternative, if not just here, but in Japan and in Europe. And so, you know, there's some risk versus reward that you have to take into account. Obviously, if you're going for broke and you want to lever up your portfolio four times like situational awareness did, you know, go for it.

But I think for a lot of people who aren't in their... 20s and 30s and can count on compounding saving you. If you're a lot older, you've got some viable alternatives that you also have to contend with. So I think it's a great point you brought up. Yeah, it'll be with us maybe for a while. We'll see how it goes. Dan. Really appreciate catching up today. Thank you. Thank you. Dan Niles. The oil selling off sharply today. As we mentioned, WTI and Brent both posting their worst day since August down almost 5%. The moves come as investors watch for possible diplomatic progress with Iran at the UN this week. The sell-off is weighing on energy stocks with the XLE down to about 2%.

Exxon, Conical Phillips, and Devon, all in the red. But diesel prices remain at record highs around 651 a gallon, keeping pressure on truckers and transport companies, Union Pacific, J.B. Hunt, Old Dominion, CSX, have all been moving lower down 9% or more this month. I would point out, actually, there were more 52 we closed than highs on the S&P today, because of the weakness under the surface and transports and fuel-exposed names were chief among it. Peter Brookfar points out, Old Dominion raised a general rate by about 5%, 0.9%. So the pain is continuing to be felt. We do want to show you the closing bell there in Chicago.

Stone X is ringing the bell there, ending the regular trading day for options. And I'm sure we'll hear much more from retailers later on in terms of passing those costs on food retail. Also, anybody who needs to put something on a truck. Let alone if we're going to get the diesel export ban, and that has major knock-on effects. We don't know if that's going to happen, but a lot of chatter there as well. Coming up, Amazon isn't very amused by Meta's new muse AI agent.

As it blocks its access to its site, we'll take a look at why and what it means for Mehta with the stock up 25% this month. Plus, Netflix is coming off its worst week in a year, and one analyst says the answer to its problems may lie in two-minute plot twists. Closing bell over time. It's back right after this.

A tiff between two Mag 7 names brewing over the weekend after Amazon blocked Meta's AI agent Mews from shopping on its site, saying META didn't alert them that Mews would have access to its store. Amazon also citing privacy and security concerns since the AI agent doesn't identify itself when it browses Amazon's site and it seems to capture customer credentials. Meta has previously said that Mews has no visibility into people's passwords or payment methods and any credentials a person's shares go into secure storage. It is not the first time Amazon tried to fend off an AI rival from its site.

In November, Amazon sued perplexity to block its comet AI browser from accessing its site. Amazon and Meta are business partners in other areas. Facebook and Instagram users can shop for Amazon products in the apps. And earlier this year, Meta agreed to use chips from AWS. So it's kind of like the platforms and the apps are always kind of tussling for control here. We've seen it with the app store over the years. But it is kind of amazing that Muse was the top download in the app store over the weekend. a lot of people unleashing it on Amazon's site.

Yeah, but I think this sort of underscores what critics would say about Mews, and that is the trust issue, which a meta can't seem to get passed in many ways, and whether or not people will actually trust meta with their data, given past concerns. And here, Amazon's raising the question about what happens to that data. Is that data scraped? How is it stored? How is it private? And so it just sort of reiterates what some people might have concerns about meta.

already. Yeah, no doubt about it. I do think that that is a pretty high hurdle that that meta's going to have to scale. I find it interesting people who are at least experimenting with it, you know, to a fair degree over the weekend, but we'll see what blows back. In the meantime, Netflix shares have been under pressure on engagement slowdown concerns, but a new note from Piper Sandler highlights a potential solution. Micro dramas, the firm saying the slowdown stems from the migration to mobile and disengagement from younger viewers. Although microdramas are still in the early days, Piper says the format is scaling fast, and the demographic overlap with Netflix's weak spot is notable.

They estimate the format could add between 1.9 and 5.6 billion hours watched for Netflix and $1 billion in revenues in 2027. A microdrama, by the way, in case you didn't know, is a one to two minutes scripted series designed for mobile viewing that usually involve fast-paced plots and cliffhangers. Peacock, Fox, and Paramount are already testing the format. It sounds like they're trying to get to a demographic whose attention spans just aren't quite long. And so they've got it. Exactly. And so they've got to cater to that and capture some of that. I mean, I know it's a category that kind of exists out there.

It is kind of funny. It reminds me of like it's like a single panel cartoon as opposed to reading a book. You know, it's just like one little turn of a story beyond that. And everybody seems to think they have a solution for Netflix, you know, look more like YouTube, you know, make more kind of podcast live type stuff. A little more casual. Who knows if that's going to be the solution, but it's kind of ironic because Netflix went all the way the other way of spending heavily on prestige, scripted stuff. Right. And even trying to get some Oscars for the studio.

Theater releases, right. So, I mean, is it all going to converge at some point? Everybody's offering the same kind of stuff. Right. Everything all the time. And it's a matter of who has the installed base of users. Well, just ahead, it is a stark split between two big pharma stocks. Novo Nordisk falling as its growth plan and promise of new blockbuster drugs fails to.

impress the street. Meanwhile, Eli Lilly ending in the green with the company getting set to break ground on a new plant in Texas. We'll look at the divergence in the obesity drug leaders. Welcome back to closing bill over time as a battle. The weight loss drugs continues. Eli Lilly is breaking ground on a new $6.5 billion manufacturing plant in Houston that will primarily produce its new obesity pill. Our Annika, Kim Constantino, is live at the groundbreaking with more. Hi, Annaica. Hey there, Melissa. It's been a big day for both Novo and Lilly, but let's start out with Lilly here. As you said, right behind me is around 240 acres of land that will be the

site of that $6.5 billion manufacturing facility. And you're exactly right. It will primarily make Fondaio that obesity pill. In my conversation with Eli Lilly's CEO, Dave Ricks, he told me around one-third of new patients on oral GLP ones are actually on Foundaio. And he also said that Lily happens to be capturing the majority of patients that are now starting to take GLP ones through Medicare coverage of obesity drugs. Here's what he told me. me this morning. Big start so far. I think there's about 700,000 new seniors who've started on GLP1 medicine just since July 1. So that's very encouraging that seniors are talking to their doctors, they want to manage their weight, they understand there's long-term health consequences.

It's very market expansionary, which is what we had hoped. Lily's doing well in that. We're capturing about 7 out of 10 of those new patients. Those comments came hours after Novo's Capital Markets Day, where it unveiled a long-term growth strategy that really underwhelmed investors. They were looking for more specifics on how they could reach some near-term growth targets. BMO analysts really summed it up and said it's less transformational that they had really hoped here, Melissa. It's interesting because the growth rate, the Compant Annual Growth Right for Revenue that Novo had laid out, Anika, matches a lot of its competitors. That's through 2030, we should add, Merck, as well as Eli Lilly, Pfizer, Abbe,

And so where did the disappointment in Wall Street lie? Is it just that they weren't specific on which drugs would be the blockbusters that would get them there? Or what things will look like after patent expiry? That's a great question, Melissa. And I think a lot of the issue came with the actual products and how that's going to offset the patent expirations that we're going to see for semi-glutide, which is that main ingredient that you see for both Wagoe and OZempic, and that's in 2032. And so, you know, Novo had said that they're targeting more than the same. than five blockbuster drugs by 2030 to help them reach that, you know, that $23 billion goal by

2035. But those products include Kagrisama, for example, that's a drug that has disappointed the street on multiple clinical trials at this point and really failed to differentiate from other products. And BMO analysts also said that some of the other value drivers here are still pretty much earlier stage for Novo. So they're having a hard time really believing this growth strategy story here. Antica, Dave Rick's telling you about the uptake among seniors who are covered by Medicare with 700,000 new patients using those drugs since July 1. So that's less than three months. Do you have any sense as to whether that's kind of much quicker in terms of penetration than was expected

and how much more might follow from there? That's a right question, Mike. It's really unclear at this point what the trajectory could be from here and also what that penetration could look like. There's Clearly a lot more patients that they could reach. You know, they've talked about around, I think I've heard 20 million from NovoCO in the past or 15 million from Lilly CEO. So there's much more to reach in the Medicare market. But as Lily CEO said this morning, you know, the uptake is strong for its products. And overall, the use of the program in Medicare is strong here. And given that this new factor that they're breaking ground on, Anika, is really for a Foundeo pill.

What is a projection in terms of what total their manufacturing can support? terms of uptake of this drug, which has largely been, I mean, disappointing year to date, especially compared to, you know, the oral Wagovi launch. That's the exact question I asked Dave Ricks himself. He couldn't really share the actual how much additional manufacturing capacity that this could add for Foundaio. I will note that it is, you know, gaining some traction here. He did point out that, you know, around 33 percent or a third of patients are, you know, are taking found AO in terms of oral GLP ones. So it is slowly gaining ground here. And I've seen analysts before say that there's a potential in the future for Foundaio to really track above the Wagovi Pell in the future.

That's something that we're going to have to keep watching here. Anika, thank you. Wall Street is gearing up for President Trump's meeting with Chinese President Xi Jinping. Up next, we'll lay out what's at stake and what investors can expect closing bill overtime. Welcome back to closing bell overtime. Let's get to Christina Portsnevles for our news update. Christina. Yeah, let's start with Ukrainian President Vladimir Zelensky.

reportedly met with the CIA chief John Ratcliffe in Ireland today. According to Reuters, two people familiar with the matter confirmed the meeting, but didn't say what they actually discussed. It comes after Ratcliffe made an unannounced visit to Moscow late last month where he reportedly proposed a peace summit between President Trump, Zelensky, and Putin. A White House official says President Trump will hold a trilateral signing ceremony in New York tomorrow. The official says he will finalize an agreement with the Prime Ministers of Greenland and Denmark that will allow the U.S. to expand military presence in Greenland.

And on the same day, the FAA halted flights at Philadelphia, New York, and Boston airports for hours over an air traffic control malfunction. The agency and Department of Transportation debuted a new AI-powered tool to manage U.S. airspace. Officials say the new system, which cost $875 million, will analyze real-time flight data and weather conditions to predict flight delays and advise air traffic controllers. Can't help but smile the irony of that. Yeah, of course.

It's always a work in progress, Christine. Thank you. One of the major events, Wall Street, will be watching this week is the meeting between President Trump and Chinese President Xi Jinping. That comes after Treasury Secretary Scott Besant met with Chinese Vice Premier over the weekend.

Megan Kisela joins us with a look at what's expected to be on the agenda. Megan. Mike, that's right. Besson and Jameson Greer, the trade representative this weekend holding working-level policy meetings. Those were designed to lay the groundwork for possible deliverables for the leaders to announce later this week. Now, nothing is set in stone just yet, but we're watching for President's Trump and Xi to possibly extend the trade truce that they've had in place since the Busan meeting last

fall, to reduce tariffs on about $30 billion in imports and exports, and to establish an AI safety dialogue, essentially an open line of communication between the two countries on AI. Now, all of that will be discussed throughout what will be a jam-packed visit for the Chinese president, three days of official programming, starting with a rare greeting on the tarmac on Wednesday. Thursday will be the official bilateral meeting plus a state dinner and there's a private tea and a tour on Friday. Now, the state dinner is becoming really a who's who of executives in tech and finance. Take a look at some of these familiar names, all expected to attend. Sam Altman, Jensen Huang, Jamie Diamond, Jeff Bezos, Elon Musk, I could keep going. I will add, guys, we do expect a Chinese

business delegation to be attending that dinner as well. Melissa, back over to you. Megan, thanks, Megan Cassella. So what are the markets hoping will come from this meeting? Joining us now to discuss is Ariana Salvatore, Morgan Stanley's head of U.S. public policy research. Ariana, great to have you with us. What's going to be the key deliverable here out of this meeting? Well, first thing I'd say is the bar is actually pretty low for the summit overall, right? There are some minimal steps we expect on trade, you know, this $30 billion or so of reciprocal relief.

We know that AI dialogue is progressing on a separate track. We can get into that. The real date and the real deliverable to watch is November 10th. That's a really important cliff in the bilateral relationship. Three things simultaneously expire. You've got the Section 301 exclusions. You've got the BIS affiliates rule suspension. And then, of course, you've got the rare earth's truce that was agreed to around the end of last year.

Those are really going to be the key deliverables to watch for. I think that's the most important thing on both sides. So those things, agreements on those fronts seem to be pre-baked, I assume, for the presidents to basically unveil. On the AI front, it's obviously kind of, you know, come to the fore in a hurry. here. What are we even talking about in terms of cooperation or monitoring or slowing down or anything like that? Yeah, absolutely. And some headlines flying today even on this front. I think we should unpack what each side is looking for, right? To answer your question, it seems like the U.S. is looking for some sort of joint mechanism to look at cyber attacks, to sort of unveil these sort of

safety characteristics together and work towards creating a joint dialogue. On the Chinese side, we think they're really seeking just more visibility on how the U.S. plans to regulate. and what potential actions could look like on open weight models specifically. When we heard Besson's meeting with his counterparts this weekend, from the two readouts, what we did see was the U.S.A. that's a very constructive. You know, we're moving forward on the dialogue. On the Chinese front, we didn't get too much specifics or too much detail.

So I really think that there is many questions still here on implementation. What is the threshold for reporting? What kind of agency is going to be leading this? You know, much more uncertainty than we see right now. At the same time, I mean, the call for guardrails in the U.S. for AI has been all about we can't let the Chinese win. So with that sort of context, how much success can they actually have in terms of this cooperation on guardrails

if there's such skepticism? It's a very delicate balance. And the way that we see this playing out is effectively the US administration pursuing what we call a middle path. So control to the frontier, open below. Now, why would that be the preferred path of the administration? I mean, a few reasons.

First of all, as I said, we have the geopolitical relationship with China to think of. You don't want necessarily ban all open weight Chinese models. that'll cause some tension in that very delicate truce that we see. The second thing I would say is the U.S. administration doesn't want to stop or really inhibit adoption and diffusion. And right now we know that majority of companies are using some sort of hybrid of open and close weight models. So there needs to be some, you know, facilitation from the administration side.

The third thing the U.S. is trying to seek is to protect U.S. IP, right? Secretary Besson and we've seen others in the administration come out, say they're worried about distillation. And so we think this middle path, much more targeted, much more precise, would accomplish those goals. Yeah, I was going to get at the distillation part. You look at those CEOs who are going to be at the table, and a lot of them seem to believe that their models are being kind of misused in this process. Is there any hope of even having an acknowledgement that that's an issue on the Chinese side? So from the administration side from the U.S., they have put out these public advisories. What we'd be waiting to see is an evidentiary finding, right? Because these sort of accusations

don't really go far. They don't really hold merit from a policy perspective until we see concrete action. From the Chinese side, I wouldn't expect much in terms of an acknowledgement of that risk. Like I said, so far the readouts have been, you know, the Chinese side saying that we're having constructive conversations, we're moving forward. We've seen a lot more detail coming from Secretary Besson. Do you think that there's going to be any movement from just the models and talking about guardrails there to the physical component of AI, the sensors, the things that we are using here in the U.S. to build out a physical AI infrastructure. We rely very heavily on Chinese manufacturers for all of that. Absolutely. That is the crux of the U.S. China relationship, right? This chips for rare earth's equilibrium. We as the U.S. are dependent on Chinese rare earths. They are dependent on some of our advanced semiconductor exports.

So this has been the trajectory for some time. The overall direction of travel is toward more restrictions, not fewer. We are seeing that through the executive branch as well as through Congress. We have coming up in December, the NDAA, that's the annual bill that funds the Pentagon. Some pieces of legislation could potentially, you know, harden the export controls that we see through things like the Match Act, that's a control alignment tool, A, Overwatch Act. Those are all in play going forward for sure. And just a quick word on the midterm elections. There's a sense out there that maybe that's the next thing that markets might have to contend with. But I wonder even how much suspense there is in terms of what policy priorities remain in play, if we are at least going to have one House go Democrat.

Absolutely depends on which policy vector we're talking about. There's so much to unpack. I would say on the AI regulation front, midterms likely aren't a huge catalyst because what we tend to see is the government respond to incidents that are of high salience, right? And so we have a high salience incident. You know, the government configuration doesn't necessarily matter as much. You see government respond even in divided configurations, things like CARES, things like post the 2008-2009 era. So I would say midterms don't matter so much for that.

For fiscal policy, absolutely. Maybe that's a conversation for another time. Yes. There'll be some time for that. I suppose. Arianna, thanks so much. Appreciate it. All right, tech names leading the way today, thanks to AI.

players, but what happens when market indigestion hits and investors need to shift from the AI theme? Up next, a look at some ways to diversify your portfolio. Welcome back, Optical Networking Company, Sienna, Hire Today. It's fifth straight positive day as investors rotate back into some of these high beta AI stocks. Evercore upgrading Sienna to outperform, saying its total addressable market is growing as networking becomes the latest bottleneck in the AI buildout. The analyst also writing Sienna has multiple avenues for growth and sees margin expansion ahead. You can see other networking names catching a bit as well today. Well, we talked about the return of AI picks and shovels trade earlier in the show, but even as the

major indices are within half a percent of record highs, are investors looking past some cracks below the surface of the market. Joining us now is Stephanie Aliyaga, JPMorgan Asset Management, Global Market Strategist. Stephanie, good to see you. Great to see you, too. It's been kind of whiplash-inducing when it comes to which parts of this market are going to work and which ones are going to take a rest. We now have this swift turn toward AI-driven. Does that mean we should kind of trust in that at this point or look elsewhere for where maybe the market's overlooking some things? Yeah. I think what has really helped anchor me throughout this summer of AI discontent has just been the demand picture. And I think what markets are

reacting to today is that demand picture coming into clear review. We are still so early when it comes to the world of agentic AI, how many AI agents do we have working for us every day, all day? Not many. I just set up one over the weekend. Yeah, zero, right? That number is going to fundamentally change in the next few months and years. And I think the wave and the excitement around a personal AI agents is one testament to that. It may be sooner than it appears. And as we get further and closer to this world of always on, many agents working on different tasks for us, that's completely transforming the market for compute. And that demand picture is really going to be what helps power earnings and also the improved economics for some of the biggest AI players. So without

getting into specific names, but getting into a specific name, you really think that Meuse data and all the news surrounding at the popularity at this point in time, that is really underpitting this sort of pickup in AI demand at this point. I think it's part of the picture here because we've over in the conference season, we've been hearing incrementally more bullish takes and signals from this market when it comes to the demand and the success that enterprises are now seeing in driving AI-powered solutions in their businesses to help manage some of these costs. It is early. And I think what we're also learning is that AI is no longer a rising tide lifting all ships. And, you know, right now is the time for nuance and for looking underneath the hood.

But those opportunities are growing beyond just the picks and the shovels. There have been times when the idea that we're very early has been a bullish signal for investors. been times when it's been a little bit of a scary one to say, oh, no, we're early. So we've already were spending $2 trillion this year and next, and we're still going to have to spend more than that. So I just wonder how that, you know, filters into our attention at this point. Early should not be an excuse for complacency. You know, this is not 2023 and 2024, when all you really needed to do was believe in AI that it was a transformative technology. Today, valuations are high in some parts of the market. Position sizing in portfolios is very

key. You need to be prepared to weather, volatility, risks abound when it comes to this AI landscape. But we do still think there are opportunities for long-term investors to take advantage of. You just want to be very mindful of how that AI risk factors really working in your portfolio. To diversify, where do you go and are bonds the true diversifier, or even cash, cash held in a, I don't want to say savings, because that's still too low, but a CD can give you a pretty nice yield. We think bonds can be a very attractive diversifier at this place. I mean, you never know what may come. Every

recession that's come in, you know, recent decades has been something that was unpredictable in nature. And so bonds can be at an attractive, diversify from that end and you're getting paid to wait. But, you know, the 6040s been dead for some time now. We also look at alternatives. We think private infrastructure

is really attractive. Real estate can be attractive also because those two asset classes have some inflation resilience. And right now, inflation is another risk. that we need to be mindful of as well. And these asset classes will be less sensitive to the day-by-day volatility that we're seeing in this AI race.

Inflation obviously was the impetus for what the Fed did or the worry that inflation's not coming down fast enough to a hike last week. The market seems to have tried to make its peace with the idea that we might be in for a mini tightening cycle, whatever that might end up looking like.

Is that a well-placed confidence? I think so. And I think part of the reason why the Fed is really able to justify many hiking cycles, that the economy is just so resilient right now. And I think a bullish warsh is inconsistent with a doveish one. And the language that I heard last week doesn't really paint a picture of needing to cut interest rates anytime soon. Unfortunately, the inflation goalposts has been moved out by two years since January's SEP report. And that is something that the Fed is going to have to be very vigilant against.

because right now with the climb in diesel prices, but also the trickle through of inflation from this memory surge, right? This is something that the Fed is likely going to have to act against, which may result in maybe one or two more hikes. Stephanie, great to see you. Thank you. Stephanie Aliyaga. McDonald's heading lows last seen since July 2024, lagging behind some of its biggest competitors so far this year. Could the company's Investor Day this week revive investor confidence? We'll dig into that. Closing bell overtime line from the NASAC markets. I'd be right back. Welcome back. Paramount Skydances merger with Warner Brothers will move forward after the company settled with a group of state attorneys general that tried to block the deal due to antitrust concerns.

The terms of the agreement include increasing domestic production and keeping both the Paramount and Warner Brothers production lots in Los Angeles, among other things. According to a memo obtained by CNBC, Paramount CEO David Ellison told employees that he's looking to close the merger within about two weeks. Well, from media to McDonald's, the company hosting its high-stakes investor day this week as a stock continues to struggle. Brandon Gomez got the details on what investors want to hear. Brandon. Hey, Melissa, yeah, speaking of struggling shares, shares are down 27% since they're March high with investors in need of something to love. The biggest pain point here is the U.S. market. McDonald's U.S. same store sales last quarter lagged peers and grew just eight-tenths of a percent. The company acknowledged its value messaging and execution have been fairly uneven. CEO Chris Kempchinsky and new U.S. President, Sky Anderson, need to reset the affordability, value, and long-term growth case on Monday.

They'll be detailing out McDonald's next. The company's new strategy built around better food, marketing, restaurant tech, remodels, and improved service. Analysts I've spoken to are looking for longer-term plans around menu innovation and promotional strategy, how McDonald's will re-engage franchisees and over. overseas store remodels. Right now is a real growth test for the company. The question is how much this new strategy will cost and whether those investments can still deliver the free cash flow and returns the stock is built on and specifically, guys, when the turnaround in the U.S. starts to show up in results and in the stock. Brand, I'm curious, how do they get franchisees to align with their goals? That seemed to be the issue in the last quarter when it came to the

value menu, the $3 value menu, franchisees weren't executing on that and the way that McDonald's had envisioned the value menu to be executed. So how do they get them to do that? And McDonald's owned up to why there was some confusion about the execution strategy. They said that there were too many updates to the system all at once. So I think what you'll hear from the company on Wednesday is this idea that they're not going to be rolling out so many updates at once. There's going to be a focus on value, a focus on how they're going to roll out the focus on

those plays going forward, Melissa. You know, Brandon, when I look at the stock chart, I mean, I know McDonald's is, in the consumer discretionary sector, but it reminds me of a lot of the food-related consumer staples names where they just have no way around kind of preserving margins, plus keeping it affordable and all the rest of it. Is there anybody in quick serve that's really doing very well in contrast to McDonald's right now? Is it Taco Bell? Is it anybody else that seems like it has the momentum? You know, I'm going to break out a burger com for you. And it's actually Burger King. I mean, when you see the innovation that they've done at their menu and how they've rolled out a lot

of their strategy, and then you just look at their same store sales growth, the U.S. last quarter, up 7% compared to the less to 1% over at McDonald's. I'd say that that's a fair comparison, even within the same category of the restaurant names, Mike. All right. In a couple of words, what represents the innovation at Burger King? French toastings, Mike. Is it just menu items? Yeah. They were introduced while I worked at Burger King in 1987, yeah, or something like that. Yeah. I mean, a lot of us to do with the marketing push. I mean, yes, you'll look and see at how they've sort of done this refresh. And then also, look, I know this is going to sound like a joke, but chicken.

Chicken is this big conversation talking point that everyone says. I know, I know, I know. But everyone wants to hear about McDonald's chicken strategy. Chicken is the new beef. We would have thought. Thank you very much. All right, let's get you set up with tomorrow's trade today. On the earnings front, we'll get results from AutoZone before the bell.

After the close, we're going to hear from KB Home. Also tomorrow, President Trump is scheduled to address world leaders at the United Nations General Assembly in New York City. And there does seem to be a lot of anticipation around some of the sideline meetings at the U.N. between President Trump and the Iranian president, and maybe that could result in some sort of something, resolution, memorandum of understanding, something. It absolutely got into the market's consciousness this morning that maybe, if not some kind of an agreement, at least a kind of cessation of escalation. And, you know, oil prices, crude oil prices definitely did come in. Although I did also start to hear people say maybe finally the product prices are up so much. that we are going to have to start talking about demand response here.

That maybe it's finally taking a hit. Right. Hurricane season, though, will be key because we are in hurricane season. So one refiner out and, you know, that whole picture can change. So far, zero hurricanes. Exactly. We do have, although in Asia they're bracing for tremendous and possibly damaging storms. Japan, I know, is in the cross hairs there.

So NASDAQ new record high today. First one since June. S&P 500 remains like a half a percent below its former closing high. from August. That's going to do it for overtime.