Closing Bell - Closing Bell Overtime: Rotation out of Semis, AI trade Continues 7/2/26

Episode Date: July 2, 2026

Investors weigh cooling rate pressures, AI investment and sector rotation. Torsten Slok, Chief Economist at Apollo, argues AI remains the biggest long-term risk to the economy while a softer jobs report eases pressure on the Fed. The show also examines what the data could mean for Fed Chair Kevin Warsh and the path of interest rates. Brett Winton of ARK Venture Fund explores reports that the government could take a stake in OpenAI and discusses what greater public involvement would mean for the AI race. The episode also examines the political implications surrounding AI policy and regulation with CFR’s Jonathan Hillman. Barbara Doran of BD8 Capital and Bob Elliott of Unlimited debate whether the market's rotation has staying power and where investors should position next. Plus, our Phil LeBeau breaks down the state of the electric vehicle market after Tesla's stock sold off following its latest delivery numbers. The episode closes with a look ahead at the next catalysts driving markets. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Bringing end to the trading day at the NYSD, Sinda closing out the trading day and at the NASAC team shares doing the honors. Welcome to closing bell overtime. We're live from studio be at the NASAC market site. I'm Melissa Lee along with Mike Santoli. Stocks mixed today as the rotation continues, and down up nearly 600 points ending near the highs of the day. S&P about flat, NASAC down a little less than a percent. Healthcare and staples lead today while tech and discretionary lag, discretionary led lower by an 8% drop in Tesla, tech dragged down by memory names more in the market straight ahead.

On our radar at the close, is AI the biggest risk to the market right now? Invita proposes a new revenue model, and what could a government stake in open AI mean for a potential IPO? Lots of those questions. It continues to swirl around the AI trade, which is having a little bit of a reckoning, this extended gut check. You mentioned this mixed market. Memory got way overextended. We all knew that. The question is how much that has to correct.

It's still in process. Everyone embracing the idea that the market's broadening out. We have a lot of the old economy sectors working, equal weight S&P at New Highs. It's all true. It feels very virtuous. It feels very earned. Everyone kind of likes that it's on firmer footing. I get a little bit nervous because we've seen these interludes before.

And when the driving leadership of the bull market gets a little bit on the defensive, sometimes it just you get some slippage in there. And so far it's really hanging in there fine. But, you know, Apple was up huge today. Yeah. Right? And Apple is less volatile than the S&P 500 as a stock. It's just kind of defensive.

So you chose you the mechanics are working, but it seems, again, a little forced. Yeah. We were talking in the breaking you were mentioning on Closing Bell, you know, names like Caterpillar, you're down 10%. I mean, off, granted off of all-time highs, but still this sort of encapsulates what is happening in the markets in terms of that broadening and what this broadening feels like. We're seeing the leaders being taken down a little bit.

Sox, it's its worst two-day stretch in about a month. So we'll see if that lasts until next week. And if that gut check continues in the AI trade, even as we enter earnings season. And look, it's very positive if it's just the market's way of kind of resetting and getting rebalanced. But if it really represents the fact that the memory trade and the obsession with this shortage was the final extent of the high-conviction AI trades, right? Because you went from hyperscaler, you went through Nvidia, you went through all the rest, and then we were left with nothing but memory.

So I guess we have to see if the overall market's going to have an answer for that. Let's head to Christina Parts in Nevelas now for a look at some of today's biggest movers. Hi, Christina. Hi, guys. Well, let's recap the Dow up closing hire in the NASDAQ and S&P 500. Let's say it lowered S&P pretty flat as chip stocks really struggled, all following weaker than expected jobs report. Big Tech was relatively mixed way down by META and Tesla. So META was negative earlier in the day, but also gave back yesterday's 9% pop, specifically this afternoon.

Reuters reporter's CEO Mark Zuckerberg told employees, AI agent development hasn't, quote, accelerated in the way we expected. So that added further downside momentum. Tesla, on the other hand, the second quarter deliveries beat, but expectations were quite elevated. So you saw shares close over 7% lower. Apple, climbing almost 5%. Despite a report to cut its iPhone 15 production by roughly 15%. Shares have really just rallied since last Thursday's price hikes.

And then you guys talked about this momentum trade unwinding. I have checked out the SPMO, the investor. So S&B 500 ETF, that fell roughly 3%. Led by the usual. Micron Sandisk, storage name Western Digital, extending yesterday's selloff just on reports that Meta plans to sell excess computing power. And that's really sparked fears of AI compute oversupply or at least a lot of debate out there. And with chips down, we actually saw software move in the other direction.

Adobe Autodes, Service Titan really lifted the IGV today. And then switching completely out of tech defense outperformed with the ITA up for a fourth. straight day after Reuters reported Canada plans a global defense bank offering billions of dollars in low-cost military financing. So it helps some names there. Last for not least, we save healthcare. The day's best sector closing higher with the XLV ETF closing at a record, guys. Happy weekend. Yeah, dramatic move there for a sometime sleepy sector. Christina, thank you. Let's turn out to the energy market. More than 147 million people in the U.S. are under extreme heat warnings through the end of the week. Even overnight temperatures are expected to stay warm,

despite this natural gas prices continue to fall. Pippa Stevens has got that story. Hey, Pippa. Hey, Melissa. So it is really hot outside, which is setting up a major test for the electric grid. PJM, which is the largest grid operator, powering 67 million Americans across the northeast and Midwest, forecasted peak demand today at a record 166 gigawatts that would take out the prior high from 2006. Power prices have surged as utilities paid top dollar to secure generation to make sure the lights stay on and that air conditioners continue to run smoothly. Last week, prices in the PJM day ahead market averaged $44 per megawatt hour for today. That was up to 436 for a gain of nearly 900 percent according to S&P Capital. Yes, energy is Jake Landis telling me the highest one-hour

price from 7 to 8 p.m. tonight topped $1,200. For New York's city, which is not in PJM, prices nearly doubled overnight. Now, despite this record demand, natural gas is lower on the week, thanks to the heat wave already being priced in, high production and storage above the five-year average. But watch the utility stocks because it was the third best group on the day. Independent power producers like Constellation, Vistra and Tallinn can be beneficiaries since they can get higher prices for the power. They sell into competitive markets. And guys, I'm looking at the load right now. PJM says we have topped 160. 61 gigawatts.

Wow. And it looks like, Pippa, there are some rolling blackouts going on in order to manage the demands on the grid. You know, consumers will be looking at that NAC gas chart, Pippa, and wonder when their prices were going to come down. And I was just looking at a chart from the St. Louis Fed saying that, you know, net gas prices are having an increasingly muted impact on the actual price consumers pay for electricity because of all the demands on the grid and the need for KAPX. That's right. So one thing, of course, we have to remember that Henry Hub is a regional benchmark. And so, you know, if you really want a more accurate look at what what the price of natural gas actually is, you have to look around the country, like Algonquin

city gates, for example, into the northeast. But the reason why these power prices get so high is because they do have to pay everyone what that marginal supplier is. And those marginal suppliers are what's known as peaker plants. They only come online at times of extreme stress, and they are very expensive to operate. And they typically are owned by private equity firms. And Maybe they only operate for, say, two days a year. And during those two days, they capture so much money that then it's fine to be offline for the rest of the year. And so that's why as the demands on the grid grow, it's more about what is the marginal cost for supply versus what is the natural gas price. That's becoming an increasingly smaller share of the overall bill.

Because when you think about utilities, you also have to think about all their input costs, things like labor, you know, their power prices. All of those costs are going up. And so that's also feeding into our electric bills. Now, we're not going to feel the entirety of this power price spike because utilities typically are hedge to a certain extent, maybe a third on 10 years, a third on three to five-year contracts, and a third in the spot market. But, you know, this makes the case for more generation needing to be added to the grid, which then they can earn a rate of return on that rate base. Yeah, for sure. Hopefully, maybe just a couple days of this white knuckling to get through PIPA, this high demand period. Let's now turn to the bond market. The 10-year yield starting the week at 437. has risen to more than 448.

Is it digested a lot of data along the way? Let's turn to Rick Santelli in Chicago. Hi, Rick. Hi, Mike, indeed. You know, if you look at a week today, what should jump out at you is right towards the middle of that chart. Wednesday, joltz, boom,

yields popped up on that tenure. They've stayed elevated. As a matter of fact, the market's closed early today, but if you look at how they closed, it's pretty fascinating. We are unchanged on the day in the tens. However, on the week, we're up 11.

basis points. Now, throw in the two-year. The two-year gave most of the jolts Wednesday back, and it hovered right around down four basis points on the close, up five on the week. Why is this important? Well, we had fewer jobs in a lower unemployment rate. The two-year seemed to concentrate on the fact that probably the easing cycles over, but no decision on tightening. Whereas the 10-year, well, even though it peaked, as you look at this chart going back to April, it peaked at 467 in, in May, it is definitely still elevated because inflation is elevated, even though it might not be accelerating but decelerating. And one other thing, looking at that chart, where's all the bottoms there to the left and

now to the right? Right around the mid-430s. Mid-430 support, 467 resistance, and dollar yen. Finally, we see the yen bounce a bit. That chart's a week today to the dollar. So after hitting 40-year highs midweek, we did see a little give back in front of the dollar. of the holiday weekend. Melissa, back to you. Rick, thanks. Have a good fourth. Rick Santelli, let's say on jobs now while today's number is being viewed by some as Goldilocks for the Fed,

there are still lingering questions about the impact that AI will continue to have on the jobs market, while professional and business services, social assistance and health care, all saw gains. The technology sector saw declines in June, specifically in the IT industry. That was down 3.3% from May. Joining us now is Torson-Slock, Apollo Global Management Chief Economist, who is just back from Portugal. He was at the meeting of the central bank heads. Torsten, great to see you. I'm glad you made it back from Portugal, all safe and sound. In terms of what we're seeing in the jobs report, it was 17 of the past 18 months we saw declines in information technology payrolls.

Is that the impact from AI? Well, there's probably a lot of things going on. I mean, generally speaking, exactly, I should say, it was a Goldilocks report where we still have steady, strong job growth. It was not as good as the market had expected. And we also had the unemployment rate going down, which was better than what the market had expected. And in terms of the composition, yes, maybe some of that is because the tech sector has been slowing a bit down. It could be because of AI implementation. It could also be because jobs in the tech sector have already been fairly elevated for quite some time. So there's several

reasons why it could be that the tech sector specifically did show some weakness. And in terms of AI in general being a potential source of risk, is it that it's a risk to job creation? Or is it a risk that there's a tremendous amount of CAPEX going on? We don't really know. if there's malinvestment along the way. And if that goes away or if that gets reduced, then that all of a sudden decelerates the whole economy. Well, from a market perspective, there are really three reasons why AI is playing such a big role.

First of all, exactly if AI does begin to slow down for whatever reason, either that people begin to worry about, that it's not delivering their ROI that people expected, it could also be because we're not seeing the implementation as quick as people expected. All those things could ultimately result in simply less CAPEX over time, not necessarily the next several quarters. A lot of the financing have already been in place.

But that would mean a GDP forecast where growth would ultimately begin to slow down. But the second reason, of course, which is very important, is what we're seeing in markets and what you just spoke about, namely the rotation away from the high, high concentration that we've had now for several years where the 10 biggest stocks still make up about 40% of the index. That would also have very significant implications if AI does not deliver on the expectations that people have, both in public and in private companies. And finally, it also becomes important for demand for Treasury. because hyperscaler issuance in the belly of the curve

at about $700 billion in issuance this year is crowding out demand for treasuries. So that means that fixed income managers that have to buy investment grade credit, they can either buy hyperscaler debt, they can buy financials or they can buy U.S. treasuries. Now, if there's less dollars going to U.S. treasuries, that means that there's just more money

that's going to hyperscaler debt, and that also begins to have implications if AI does not deliver. So there's a number of reasons, not only on GDP, but also for financial markets that could potentially become very important, if AI does not deliver on the high expectations that are currently in markets. There's a lot at stake.

A lot is riding on this AI boom, Tours, in terms of the risks to the economy. Do you see the risks outweighing? I mean, how do you sort of view the risks in terms of the balance of risks here? Yeah, because the challenge is that if AI does not succeed, in other words, if we do not see the ROI coming as quickly as we are all hoping and expecting, if that happens to take a longer time, we will, of course, begin to see some valuations, especially the Magnificent 7 come down quite significantly. And that's a problem because they have such a high concentration in the SP500.

So if AI underdelivers, we have a problem. But if AI overdelivers and the unemployment rate goes to 10, 20%, we will also have a problem because in that case, we will have a lot of people who do not have money for consumption. The unemployment rate will be high. And if that's the case, GDP will also be slowing down in a significant way, but in this case driven more by the consumer. So that's why there's a fairly narrow path where AI can succeed

because if it underdelivers, we have problems, if it overdelivers, we have problems. So that's why the market's discussion here is all about what's the likelihood that we walk on the narrow path where we will not have the case where things either go wrong to the downside or go wrong to the upside. There was some discussion, certainly at the conference in Portugal, I'm sure, along with an interview that we'd had with Kevin Warsh,

about productivity, what we should expect out of it, when we might expect to see benefits and what that means for Fed policy. Absolutely, sir. Had the interview with Walsh, of course, and the other central bank governors on this day. and the key response that he gave exactly to this question was that he did expect productivity gains to come along. But he, of course, also talked about the task forces.

He talked about communication policy. He didn't give any forward guidance, but he did give the little hint that he did think that inflation had been come down, and therefore inflation risk to inflation had been moving lower, which makes a lot of sense given where all the prices have gone. But the conversation was indeed also in all the discussions in the panels in Central really about what is the outdo for AI, not only for the U.S., But Europe is far, far behind when it comes to AI. So therefore, what can Europe do to catch up to the AI investments that we have in the U.S.?

So there was a lot of discussions that really centered around this broader issue of what is the outlook for AI. That's why the conversations we are having at the moment about what is the earnings that are coming. What are the earnings that are coming from these companies is absolutely critical over the next several quarters. But it does sound, Torsen, like you're saying, that the path is so narrow for AI to succeed in the impact on the economy to be good, that it's actually kind of frightening. I mean, it sounds like there are more scenarios than fewer scenarios where AI will negatively impact these. Well, you have in the last 48 hours had several guests on your shows that have talked about the downside risks. But let's not forget that there's also the upside risk that AI is being implemented.

Companies are investing a lot. We are all seeing our lives change because of AI. So we will see dramatic changes in the economy. The question is just what is the speed of those changes. And that's what the market is betting on at the moment. Torsten, thank you. Good to talk to you as we just see options trading close for the day. with the closing bell at CBO.

OpenAI is reportedly offering the U.S. government a 5% stake in the company worth more than $42 billion. The proposal suggests other AI companies could also offer a stake, but Anthropic and the Trump administration have yet to discuss any plans. The proposal comes as AI firms face growing concern over cybersecurity vulnerabilities and Chinese competition, while OpenAI and Anthropic are planning to go public. Is this what's best for OpenAI investors? Joining us now is Brett Winton. He is chief futurist at ARC Invest.

He also helps manage the ARC venture fund and owner of OpenAI and others. And Brent, good to see you. And how are you thinking about this? I mean, on one level, I guess it would dilute investors in Open AI out to some degree and maybe constrain what they can do. But is it smart strategically or politically? Well, it's very clear that AI generally, Open AI and SpaceXXAI, andthropic, you know, all of which are in our venture.

fund, by the way, these are geopolitically important technologies. And so I can understand why people are focusing on them as the, you know, they're also macroeconomically important technologies. This is important for American competitiveness going into the future. And I do think already American people have a stake in kind of like how quickly these companies can develop and how they can commercialize. It's better for us macroeconomically. All of the data centers that are being built here to support these AI models are great for jobs. The previous speaker said, hey, you know, if AI 16 is too much, you'll have high rates of unemployment. That's hogwash. This is an amazing macroeconomic boom that we're going to experience because of the diffusion of AI across the economy. Now, strategically, it might be

wise to create some fund that has, like, AI equity so that people feel like they have the benefit of AI, you know, lining their own pockets. I think that the company's going public could be another mechanism by which you can achieve broad ownership of these companies. And to be frank, like, the reason we created our venture fund and allow anybody to invest, not just, you know, accredited investors who have to hit certain wealth thresholds, was to allow people to have access to these meaningful monumental companies. Does this, in your view, in any way, stunt the competitiveness of American AI? I mean, does it create sort of this ring fence around USAI where we don't have to compete against China because they're going to limit potentially, you know, for instance, Microsoft's ability to run a Chinese open, open source model on its platform and sort of create these artificial barriers.

I do think, well, one, at a first principle's perspective, I think AI companies should be treated like any other company, as in every company has to pay corporate tax rates. And every company can't break the law. And we have laws in place, you know, if you sell a gun and then somebody uses the gun to murder somebody, You know, the person who did the murdering is the person who's liable. I think the same should apply to AI. If you use an AI tool to steal from somebody or to do something, you, the person who enabled that should be liable, not the underlying company. And if we try to restrict the acceleration of these companies, it does give companies in China,

which are essentially distilling our models at some, you know, years removed. So they're effectively stealing the IP from the US AI companies. And then operating as if, hey, you can have this for free. free. And there are some embedded risks in those models. For instance, they could embed in the weights mechanisms that kind of sway or potentially strategically impair companies at an inopportune time. So there is a risk to, I think, adopting that software without appropriate safeguards. But I think that broadly, there should not be the government picking winners and losers here, as in even within the U.S., you know, we have a vested interest in XAI, OpenAI, and

anthropic, both in our venture fund and in our ETS and Open AIs case. And I think a level playing field where everybody can compete will result in the best outcome for certainly Americans, but really for the whole world. And that's what I'd advocate for. So are you saying, right, that Chinese open source models are stealing from closed models in the United States? I mean, this is pretty well documented, as in if I systematically ask a frontier model questions, I can figure out some of the underlying magic behind it to how it's answering questions and then compress it into my own model. So I don't have to pay the R&D costs that OpenAI or Anthropic did to get nearly frontier class performance. Now, there are things that Anthropic and Open AI are doing to

try to protect themselves from that attack factor, but it definitely exists. And it's a way that open weight models have been, you know, keeping touch with, albeit not in competition. with the frontier. Brett, you own all three or have an interest in Anthropic Open AI, XAI, you said. Does that mean that you're indifferent as to how this plays out in terms of which one wins? Is there likely to be one that turns into the industry standard in some respect or kind of the base level model for what we're looking at in the future? I mean, there certainly could be. We think of the frontier model kind of layer of the value chain as being worth $15 to $20 trillion by 2030.

And I think those three companies are all jockeying for that position. It's likely that there is a handful of players, just like there is in the infrastructure as a service space, and that the margin structure looks very similar. So on the enterprise side, I don't think it's likely to be a winner take-all. I do think there are some platform-like characteristics that could allow one company to position itself ahead of the others, but ultimately it will resolve into how much compute they control on an underlying basis. On the consumer, I more likely to be winner take-all, and their Open AI is extraordinarily well-positioned versus the Google and the metas of the world. And so we see that as almost a $10 trillion opportunity alone by 2030.

So you can think of collectively the AI opportunity for these frontier model companies across enterprise and consumer being on the order of $20 to $25 trillion in enterprise value. And that's why the companies underwrite well for us as exposures in the venture fund. So, you know, we do very careful price targeting over five and 10 years. And we think that they are really incredible places to deploy capital today. People look at the valuations. They say, these are very large. And they're very large because the opportunity is monumental. And this goes back to the macroeconomic point.

You know, I think this is going to be a remarkable half decade of macroeconomic growth. That's going to be great for jobs, not negative for jobs. So I'm profoundly bullish both on AI and on the U.S. in terms of competitiveness with the world. Spoken like a chief futurist. Brett, thank you. Thanks. Brett Winton.

This wouldn't be the first time the Trump administration has taken a stake in a private company. According to the Council and Foreign Relations, the government has participated in more than 30 deals, committing over $26 billion in direct investment while catalyzing another $7 billion from the private sector. Most of those investments have been concentrated in semiconductors, critical minerals, and quantum technology. The standout has been intel. The government acquired a 9.9% stake in August. 2025 at just under $21 a share. Intel closing today above $120 a share, making that investment one of the program's biggest winners. Joining us now as Council and Foreign Relations Senior

Fellow for Geo-economics, Jonathan, great to have you with us. This is a sort of unprecedented I would imagine. I mean, most of the time governments take stakes in companies at a time of duress and a time of economic duress. Does this make sense in your view, or is this something that we should be concerned about that the government is taking such an active role in investing? So this would be a unique investment, even for the Trump administration, which as you point out, according to our data at the Council of Foreign Relations, we're tracking 30 deals that the administration has done that involve equity or quasi-equity. Most of those deals, the vast majority of them, have been done in areas that lack sufficient private capital. These are strategically important

areas like critical minerals, semiconductors, quantum computing, and others, where there is not enough private sector investment going to those places, given how strategically important they are in the U.S., given not only their commercial importance, but their applications and capabilities for military uses. This OpenAI proposal, I think, is quite different, right? You're talking about a company that's very well capitalized that is preparing for an IPO that will attract even more money. And yes, of course, AI is strategically important, but it's hard to see the market failure here in the case for the government being involved to attract additional investment. Well, I guess then what do you think the case is? Clearly, it seems to be political protection

or at least making sure from Open AI's perspective that they're not restrained or otherwise penalized by a government that has shown misgivings about the development of AI. And when it comes to anthropic or something? It does feel less like industrial policy and more like political insurance. And because on the industrial policy side of things, again, yes, it's a strategically important area, but there is not an absence of investment

going to this area. In fact, you know, quite... Thorsten, for example, was arguing, you know, this is actually quite the opposite, right? And so, you know, one of the arguments has been, let's give Americans a slice of the upside in AI. I think we need to remember here that I don't know when the last time is that you looked at your retirement account, but if you've got an S&P 500 index, you've got lots of AI exposure, you've got an emerging markets index,

you've got lots of AI exposure. And increasingly, if you've got a bond index, you've got growing AI exposure. So I don't think the question is necessarily, how do we give Americans more exposure to AI? We should be thinking also about how to protect them if indeed this is a bubble that bursts, while continuing to do the work that we need to do in other strategically important areas and supply chains. Yeah, in a bull market, you only think about the upside and not the downside, which is, you know, bound to happen. Jonathan, I'm curious, though, you know, from the standpoint of the CFR, I mean, it seems like a lot of this investment is really fueled by a fear of China, or the fear of Chinese technology making it here, or a fear that China will lock us out of access to various things that we need. Is that sort of the common thread in your view?

Yeah, we've had a couple of wake-up calls in Washington. I think we had one during COVID when we saw factories in the U.S. begin to close because we couldn't get access to important supply chains that were on the other side of the world. But much more recently, we saw the Chinese impose a series of export controls on rare earths that really got the attention of business leaders and leaders in Washington. And so we've now see a really very serious effort to build capacity domestically and to work with partners and allies to address those areas. You can't do it overnight and you can't do it for free. And the case from the government being involved in those areas is because there is not sufficient private investment.

And the Chinese are playing a game in those areas where in many cases they're competing at below market terms. Jonathan, great to speak with you. Thank you. Jonathan Hillman. Speaking of the administration, do not miss. Joe Kernan's exclusive interview with President Trump. That's coming up 5 p.m. Eastern Time on Fast Money. Let's offer stocks making a big comeback and Palantir the latest name to get upgraded by analysts.

Look at whether this surge is sustainable straight ahead. Plus, Nvidia announcing a new revenue sharing plan as investors start to get more nervous at its biggest customers could soon be its competitor. Details next. Closing bell overtime. Live from the NASDAQ market site. We'll be right back. Welcome back. Invidia is announcing a new revenue sharing plan today. The company will partner with an AI start-ups offering its computing infrastructure in exchange for a share of future revenue, naming two initial partners who will provide the compute power behind this scheme. Similar to Microsoft, Oracle, and Amazon, Nvidia is looking for new ways to secure long-term financial deals with customers. I spoke with Ed Zittron of Easy Primary Research this morning. He's a skeptic of the AI business model in general.

in its future. He sees today's NVIDIA move as telling of what's to come. Take a listen. I think it could be the neoclouds, because with this rumor of META selling their AI capacity, I think companies like Kaur, even especially Nebius and Iran and cipher mining and all of them, Terra Wolf as well, they are all very, they're basically outgrowths and their subsidiaries of Nvidia. Invita is now, according to the information, going to be paying them to rent back their GPUs when they install them in the data center. This is the, this is the, this is a, this is a, is something that only happens in an industry without diverse and real demand. It's like there's a kind of gold rush for the mining claims, and then the ones who got there

first are willing to kind of sell access for other people to search in there as well. And, you know, there's obviously a lot of criticism of the whole circularity with NVIDIA for a long time now. And, you know, it's just a complexity continues to grow around all this. You wonder what the underlying organic demand might be. This reminds me of when software companies said to SPACs, we'll supply you with whatever subscriptions it is for share revenue. I mean, it just sounds very sort of, we're going to help you finance your growth. Right, exactly.

And, you know, you want to ensure that the whole infrastructure remains a refreshing. Maybe there is a good kind of shortcut for some smaller players out there who just want to plug into what NVIDIA can offer. But it's hard to keep up with, frankly. Well, Palantir getting an upgrade from D.A. Davis into a buy from a neutral. raising the price target to 175. That helped lead to Palantir's best week since March. The analyst says the recent back and forth between Anthropic and the federal government

highlights Palantir's value has a key AI deployment layer allowing customers to avoid being locked into any single model provider, strengthening Palantir's position. And it's not just Palantir software has been leading recently with IGV posting its best week in a month.

Meanwhile, the chip ETF SMH has fallen 11% over the past two weeks. It's worse stretched since April 2025. You have to wonder if that narrative of hardware-eating software has sort of abated at least for now, how long that will last. We saw Microsoft notably do pretty well this week as well. Absolutely. And, you know, it's hard to separate it out from just kind of money is circulating in other directions from into laggard groups. And Palantir has had, you know, exaggerated moves in both directions.

Now, whether it's an attractive valuation, let's look back at the price-to-sales ratio on a forward basis. it was 30 times on the day of the 2024 election. It shot up to 90 because it was considered to be very much fair. It's back down to 30. So it's essentially given back that huge valuation ramp. And maybe it's a more mature business. We'll see if it's worth it. But kind of interesting how we made a round trip there.

Up next, a breakdown of the recent big divergence between growth and value stocks and whether that trend is here to stay. Closing bell overtime will be right back. These radical rotations we've been talking about in the market, pretty noticeable here in growth versus value. So IWD, that is the Russell 1000 value ETF. IWF is the growth ETF. You see a smoother ride for value, but really exaggerated moves when it comes to here in late October was when growth peaked in a pretty dramatic way relative to value. You see, we lost a lot of ground in growth.

Value managed to do okay over that period of time. that was the broadening, right? From November through February, it was the broadening. And then growth comes back much, much more sharply after the low in March 30th. And then it falls away. Value keeps going up. So this is what the broadening looks like in terms of style. I want to point out it's not entirely different sets of stocks. Okay. Amazon is in both, but it's represented in a higher way in one versus the other. So it's kind of just about like emphasis, not. totally discreet names. Right.

But there's no sort of pattern that we can discern even if you brought this back in terms of how long they stay correlated or when they diverge. It's multi-month often when you really have one of these wholesale switches at this point. Here you see directionally. It's not just one going up less than the other one. So this shows you that it got a little bit out of whack and we're coming back into some balance. All right.

Time now for our CNBC News Update with Pippa Stevens. Pippa. Hey, Melissa. Former U.S. Olympia and David Harman. Hearn was indicted today on one felony charge of destruction of property. Hearn was arrested last month after he touched a piece of coding in the reflecting pool on the National Mall. He has denied wrongdoing. Several others have been arrested and cited after President Trump blamed vandals without citing evidence

for the pool issues since its recent renovation. As extreme heat descends on much of the country, the Energy Department is telling grid operators to require data centers to use backup power systems if they need to ease the strain on the grid. Many of them often go unused. The strain expected to be especially pronounced in the Mid-Atlantic, which is home to the largest concentration of data centers in the world. The NHS's all-time leading score is coming back for a 22nd season.

Alex Hvetchkin re-signed the Washington Capitals today on a one-year deal. He had said in recent months that he was waiting for the off-season to decide whether to retire. The Russian superstar and Stanley Cup winner passed Wayne Gretzsche. Ski's record of 894 goals in spring of 2025. Mike? All right, Piva, thank you. Well, believe it or not, we are on the verge of earnings season again. We'll discuss whether earning strength could push this market even higher.

Closing bell overtime. We'll be right back. Earning season is around the corner, and investors are awaiting a strong Q2 driven by AI investment boom. So can earning strength drive the market higher from here? Joining us now is BD8 Capital Partner, CEO, Barbara Duran, and Unlimited CEO. and CIO, Bob Elliott, could see both. Barb, is the market in these kind of violent churning that we've seen from one type of stock to another? Is it telling us anything about earnings expectations or where investors want to be positioned for it?

Mike, I think that's what everybody's trying to figure out for this second half. I mean, you had, you know, nine weeks of new highs leading up until June. And then June has just been a trading range back and forth. And you have seen violent rotations, profit taking out of the obvious names in the tech. And, of course, since then, there's been lots of. of questions about tech, whether return on investment, competition, threats of substitution. And so I think that's, you're going to continue to see that kind of churn. And then the question is, is the market broadening out? You've seen small caps really outperforms in 21 percent in the first half,

the best apparently in 35 years. But there you see about a third of the top 50 have been semi and semiconductor small caps. So, you know, that sort of thing I think continue. I think the question that, as you tee it up, is, is the market telling you, get or stay more diversified or is it saying now you have a chance to buy those old winners in mag 7 well it well i think the hyper-scarers until meta yesterday we're down 7% on the year and i think they were really cheap i mean these are still whether you're looking at their return on investment monetization these are big cash flow generators their fundamental businesses have not changed so i think those are places you still have to be and only sell-off you have to be there

so the broadening out i think is really people chasing they want to be fully invested they're finding the laggards, small cap, whatever it is, to be in. And so I think the rotation could come right back in the second half. Do you buy that notion that there is a rotation, a diversification within the tech sector, that maybe it is semis might feel some chop and some volatility here. It might be down. But we're going to see that rotation go to other areas within technology like hyperscalers. Well, I think the question that folks are trying to figure out is maybe not this earning season,

which will probably be pretty good, but looking out a year or two years, five years ahead and saying, How are you going to monetize the AI boom? That's the real question. And, of course, Facebook gave us some indication of that earlier this week about how that could be more broadly done. But the story of going from a trillion dollars of investment to $5 trillion of CAPEX in the sector leaves a lot of questions to be answered on that. And I think people are going to be looking at the earning seasons, not for the backward-looking picture of what's going to happen with the AI boom, but the forward-looking picture of how these things are going to get justified. If there's not enough justification, it's going to be very hard at the economy-wide level to justify the current valuations.

It was interesting at the open today, Bobby, after we got the jobs number, look kind of Goldilocks, bond yields come in, and everything, you know, went up together. Is the macro telling us much of anything about what equities are positioned for right now? Well, I think, you know, as we've all focused on the AI boom, we've sort of forgotten that there's a real economy that continues to plug along. And I think the challenge was the initial read looked like it continued that trend of taking cuts off the, or hikes off the table, which we talked about last week. I think then people dug into the numbers themselves in a little bit more detail, and it started to raise some questions. I mean, you see the household survey with a $500,000 job contraction. You see, you know, revisions greater than the number posted in the last month. That's not Goldilocks.

That's bad. Combined with weak wage growth. The real risk here is that the household starts to topple over. You know, they've been really holding up a lot of this expansion in the economy by spending a lot more than they're earning. If the labor market is actually softening more than people expect, that could be a pretty bad story for the real economy through the rest of the year. Are you worried about that, Barbara? I mean, there is an argument to be made that AI and the boom in KEPX spending is sort of papering over the weaknesses, you know, underneath the headline numbers. See, I have a different view than Bob does.

I mean, looking at those numbers, but if you really look at what's happening in the economy in general. First of, if you still have the 50 plus trillion in wealth created, there's a big wealth effect since 2019 and housing prices have stayed up. So people have a lot of wealth there. And when you look at wage growth is not bad. It's not right now, not keeping ahead of inflation, but inflation is probably peaking right here. And if you look at spending, the Bank of America Institute, which has 70 million of their accounts, it still looks good. People are spending. Even the lower income, yes, has been under pressure and you're starting to see, you know, the difference is there. But discretionary spending,

is still holding up and you're seeing that in travel and restaurants and all sorts of things. So I think that the things still look good. People have jobs and the unemployment rate went down from 4.3 to 4.2 percent, which is very interesting. It did. Although that was an interesting quirk, Bob, right? The labor force shrinks in the latest survey. You mentioned the household survey. I mean, how does that all funnel into your outlook for rates and bonds and whatever else?

Well, I think it continued the story around a disinflationary narrative that, you know, Remember, two years and the broader bond market, bond yields are still pretty close to nearby highs. And at the same time, we're seeing oil prices fall below $70 today. We're seeing the employment conditions weaken substantially relative to the hopes that we're in the market. That's not a story for yields to be at near-term highs. That's a story for lower yields. And probably you just need to be unlocked by Warsh acknowledging that despite the rhetoric about inflation, that's a longer-term story. and in the short term, he's going to sit on his hands with the rest of the committee.

Are you worried about inflation, Barb? Well, I think it could stay. Yeah, I think it is stickier. I think certainly oil prices, you know, below 70, that certainly helps. And I think that's why I said we've seen the peak in inflation. But I think there are structural issues here, given the AI spending, and you're seeing all the component prices, that I think it's going to be a little bit stickier for a while.

All right, Barb and Bob, good to see you. Thank you. Thank you. Well, Tesla, having its war stay in more than five years, despite stronger than expected vehicle deliveries coming up with the results, say, about the state of the overall EV market. Coming up at the top of the hour, I can't miss interview, Joe Cornyn's exclusive sitdown of President Trump. That's straight ahead, 5 p.m. on Fast Money. Welcome back. Chairs of Tesla and Rivian heading in opposite directions, despite both companies reporting better than expected second quarter delivery numbers.

Phil LeBoe has the details. Hi, Phil. Hey, Mike. Let's start first off with Tesla, and the numbers that it delivered in the second quarter in terms of of vehicle deliveries, much better than expected. The company delivered almost 481,000 vehicles. The street was expecting just 406,000 vehicles. So as you take a look at the company right now, you sit there and say, okay, coming off a very strong second quarter, what can we expect? Analysts are raising their estimates for full year deliveries.

Now, they're not going up dramatically, but they do, you're starting to hear analysts talk about perhaps they will eclipse the number of deliveries from last year, which was just over 1.6 million vehicles. What's the next catalyst for this stock and what's Elon Musk's vision for what the future holds for Tesla? We'll find out July 22nd. That's when the company reports its Q2 results. That's really the next chance that we'll get a sense of what might move this stock that has been tied so closely into what's happening with SpaceX. Now, the other EV story, Rivian, it also delivered better than expected vehicle numbers for the second quarter. Its vehicle delivery coming in at 12,613.

More important, it has raised its guidance for full-year deliveries by 3,000 vehicles. Now to a range of 65,000 to 70,000 vehicles. We will hear from Rivian's CEO on July 30th. So two stories here of better than expected deliveries, guys, but keep in mind, Tesla's deliveries, that's global. Rivian deliveries are here in the United States, some in Canada as well, but primarily the United States. Phil, is there a way to generalize about general uptake of EVs with all these numbers? I mean, I know Ford was a shortfall, but in absolute unit terms, Tesla's upside, you know,

overrides a lot of those things. Was there any response to the spike in gas prices or anything like that? It's hard to know, Mike. Do I think that the higher gas prices had an impact for Tesla? Probably in Europe that did, because they've noticed a far greater impact in terms of gas prices. due to the proximity and the flow of oil coming out of the Middle East there. And that's why we saw strong numbers. Look, Tesla doesn't break it up by region,

but analysts can put the numbers together, and the expectation was that they did better in Europe than a lot of people were expecting. They're also improving their deliveries in China. I'm not sure that's tied into gas prices. That's more reflection on the market and the competition there. So overall, Mike, can you sit there and say, better than expected deliveries? That means people are rotating back into EVs.

I wouldn't go that far, especially in the United States here, where EVs are still 6 to 7 percent of the market. All right. Phil, thank you. Billabow. Let's get you set up with the highlights of next week's trade on Monday. We'll get the ISM Services Index. SpaceX will join the NASAC 100 on Tuesday.

That should be interesting. Levi Strauss earnings, latest Fed Minutes, and consumer credit will be released on Wednesday. PepsiCo earnings. Existing home sales and weekly jobless claims are out Thursday, as well as the reveal of this year's tough states for business. And the week closes out on Friday with Delta's. earnings and SK Hynix's IPO. That should be interesting in terms of how that will impact the memory trade, which has been so weak. No doubt about it. Yeah. I mean, at first it seemed like,

wow, it's sort of a perfect little accelerant to the excitement about memory when they announced that we're going to do it. Now we've had 20%, 25% declines in those stocks. And then SpaceX going into the NASDAQ 100. It's so funny how they laid the groundwork before the IPO. It's probably only going to be a few billion dollars of net demand. It's not as big as we think. It's well less than 1% of the the QQQs, which are like half a trillion dollars. It's not nothing, but it is interesting. And, of course, it'll be interesting to see how it affects, if at all, the action in the index itself. All right, everybody.

Have a great fourth. You as well. And that's it for overtime. Fast money starts right after this break.