Closing Bell - Closing Bell: Tech Trade in Trouble? 8/19/25

Episode Date: August 19, 2025

Is it time to prepare for a bigger pullback in the AI trade? We discuss with Trivariate’s Adam Parker, RBC Capital Markets’ Lori Calvasina and Invesco’s Brian Levitt. Plus, Bill Miller IV from Miller Value Partners weighs in crypto’s wild ride. And, Allianz’s Mohamed El-Erian tells us what he’s expecting from Jackson Hole. 

All right, welcome to closing bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This maker break hour begins with the wreck in tech today and whether it is time to prepare for a bigger pullback in the AI trade. We'll ask our experts over this final stretch with the NASDAQ under the biggest amount of pressure today. There it is, down one and a half percent as you check out the scorecard with 60 to go in regulation, sharp declines and many AI-related stocks. That is the story. AMD, NVIDIA, Broadcom, they are all lower, and so is META having its worst two-day drop now since April. The company announcing its fourth AI overhaul in just the last six months. GE-Bernova, another big winner, not today, seeing its worst day since the lows.

Look at that, down near 4%. Home Depot, though, is in the green, maintaining its outlook. Shares are higher, helping the Dow, which did hit a new record high earlier today. It does take us to our talk of the tape. Losing leadership, as some now suggest that tech trade could be in trouble. Let's welcome in Adam Parker, founder and CEO of Trivariate Research, RBC Capital Markets, Lori Calvesina, and Invesco's Brian Levitt. Adam's a CNBC contributor.

One and all, it is great to have you. Adam, you first. The story today is rotation. Tech, growth, momentum, all of it under pressure. And lately, it has been the equal weight outperforming the cues. outperforming the S&P? Are we on to something here? Is this the start of something bigger?

No. No, I mean, it's been tense on your time horizon. If you're saying there's a couple week trade here, maybe. But when I think about what grows above GDP, it's hard for me to think that investment in AI, in AI infrastructure, and AI in compute and semis and the like are over, But you know, you can get breaks. I think if I'm worried about anything tactically, it's what ASML and AML and AMAT told me in the last three weeks, which is the equipment space. These are dominant market share, enormous market cap companies said that they have some lumpy business and they have some tariff issues, right? And you can't ignore that because they're, they're dominant companies in their field. But if you're looking beyond a few weeks horizon, you're saying kind of where are we in three, six, 12 months, of course tech has to participate because we're still two and a half years. into a probably a decade-long trend on semis.

And you know what one of my North Stars is? And I've really been thinking about this morning in the last few days since we were on last week. I'm a big believer in semis over software. And so whenever I get like a counter rotation, I just have to remind myself, I think a lot of big software companies that exist now won't be around in 10 years. But I know Taiwan Semi will be.

And I know some of these equipment companies will be. And so that part, I think, has been kind of coming up a lot more in my meetings the last couple of days. It's coming up in the market. I mean, if we are able to put up an SMH versus the IGV, for example, maybe over a month or month to date, maybe that will show, I think, what you're talking about and why, you know, there's a bit of a divergence there over a one month. Maybe you could do one to date.

Good work in the truck, though. That was pretty fast on the train of control. You got the A team. You got the A team on Womber Show. That was very strong. I just think it's long term. There you go. Month to date, you have seen a more determined downturn in software relative to semis.

As people ask the question, is AI killing the software trade? I think it is. And so if you want to get crazy and say, okay, well, are there mega-cap software companies that won't be around in 10 years? Like maybe? Like maybe Salesforce.com, 250 billion cap or whatever isn't a real company in 10 years. I don't know. It's a real debate because the way code gets... It's produced now.

The way we do it at Tray Verit on our team, the way of a lot of, there are businesses now that I'm not sure they're going to exist in their same form of 10 years, and I know I'm going to need silicon. I know it's going to grow. So I'm just kind of focused within tech on that semis over software as my North Star, and I think that's been coming up more and more in the last two weeks. I love how rapidly you make new enemies on this program. It's amazing. From the strategists now to the CEOs, Mark Benioff, Adam Parker, nice to meet you. all i've done since we've been is make more and more friends you know after the fact well i mean i'm just saying mid cap software had a bad couple years because people see it i i'm i pick

sales force it's one that we used at trivaryt briefly and then we stopped paying them and stop using them and cancel them because we just couldn't find a lot of value out of it right and i'm just saying i pick it as one example it's obviously a been a monster stock for years and years i'm just picking i'm trying to pick something big you can pick adobe or workday or now or others, I'm just saying we're not sure which business model is going to make it. Maybe Salesforce will, but that cohort is more potentially disrupted, more volatility can be introduced in its P&L, and I know Taiwan Semi is going to exist. I like a hot take. I mean, that's kind of how we roll here. Yeah. Lurie, there's talk that the mega caps and tech overall may seed its leadership.

Now, maybe this week holds part of the key to that, depending on what happens in Jackson Hole. Powell leans a little more doveish. You have a wave potentially going into the broadening trade in areas outside of growth tech and momentum. No, I think that's fair. But I find I'm agreeing with Adam on this, right? Maybe for slightly different reasons. But coming into this year, there are all these strategists who said, get ready for broadening. And I tend to be kind of more of a value person at heart. I'm an old small cap strategist. I'm sympathetic to that line of thinking as a human being. But we took a different stance, and we said, look, we think it's going to be more of a tug of war. And what I see right now in the data is that on the valuation side and the positioning side, I see a reason to rotate. The top 10 market cap names in the S&P 500 are trading around 29 times.

If you look at data from last week near the top end of the recent range. And if you look at the CFTC data on NASDAQ Futures positioning, broke through to a new high on notional dollar value last week. So we see crowding. We see overvaluation. But what I can't, you know, lose, what I can't get out of my head is the fact that the earnings growth story is holding up. And so when we look at the gap in consensus earnings between Mag 7 and rest of market, Mag 7 has never ceded that leadership. It has been narrowing in terms of the gap.

But in 27, that gap is expected to start widening again. So I think investors keep saying they want to think long term and look through the noise. And if you do that and look at earnings, you get pushed back into those stocks. That's why some, Brian, aren't all. that hung up on the valuation of the mega caps, because that's where the growth is. That's where the earnings growth is. Maybe they can't continue to grow their earnings at the same pace, which they were, but they're doing it enough and so much better than everybody else that when you look at

the averages of what today is versus the 10-year, I mean, meta today is 26 times forward. That's not, like, ridiculous when you look at their 10-year averages almost 25. Right. So you're a couple turns above that. Microsoft 32 versus 26. Alphabet's actually cheaper today than its 10-year average. Invita is cheaper today than its 10-year average. It's not that crazy. It's not that crazy. We also have to remember that these are not timing tools for investors to use. So be wary of using valuation, at least over any short period to think about allocation. The way I view it in reality is to Lori's point, we had a chance for broadening at the start of the year. It was a better nominal growth backdrop than we had seen in some time,

inflation higher than we had seen in some time. And you think about the first couple of months of the year. We were perhaps getting there. Beyond the U.S. was outperforming. And we ran into policy uncertainty, and that policy uncertainty slowed down economic expectations and stalled the Fed. And so the result of that is investors go back to, you know, the higher quality names. And what the market is suggesting here is perhaps coming out of Jackson Hole, lower rates, lower rates can lead to a reacceleration of economic activity. But that's what I'm sort of suggesting. Investors into value in small. I'm skeptical as well. Color me skeptical with the rest of the

crew up here. Okay, because I mean, at one of the trading desks today says mega caps lag more than lead in easing backdrops. I think we all expect we're going to be in an easing backdrop. It's only a matter of when, right? Not if. And that there's going to be a shift into value and equity income in the second half of the year as I think those two thoughts are tied together. You're an easing backdrop and you get a shift into value. Nobody is suggesting that tech or the mega caps aren't going to participate, but are they going to participate to the degree they are at the expense of everything else. You know, the whole broadening thing

kind of, I need to like ask some follow-up questions on, right? Meaning, if a $4 trillion market company goes up 10%, that's $400 billion, so yeah, then not a lot else can go up $400 billion. But if you go to the lows from when the president said buy stocks April 8th, you know, best call in the year,

maybe one of the best calls of all time. Yeah, the guy killed it. You know, I think the median semiconductor stocks up $8,000. 2% all of the top 30 stocks are ups and absolutely like lots of stocks are up a ton like what are people talking about broading if we mean broadening all they mean is the big companies are up a lot sure that's true that's math but look at jp morgan look at morgan look at morgan stanley look like there's tons of stocks that are up a lot this year so all people mean by broadening is that

58% of the s mp 500 is in three sectors it's tech comm services which is really also tech with google and and meta and and financials and they have done well and if you're bullish on us equities, you have to believe that tech and financials and comp services. Yeah, but you, I've read your notes today. You look at some of the action in names, high-flying, growthy names, and you have a hard time figuring out why they are, where they are. Palantir is one. I think, you know, I was making fun of myself in the note, just saying, like, you know,

when I, you know, the younger version of me wants to beat up the current version. You sort of alluded to, Lori, some of the things you used to believe in there are. true a little bit. You said, quote, the stock is among the most, if not the most expensive stock I've ever seen in my career. It is. The CEO is wildly promotional and attacks the sell side if they write anything critical. Alone, these two facts might have tripped into cell signal territory 20 years ago. For sure. And then the third thing that really melted my motherboard was the security guy in my office building asked me he should buy it. So those three combined, I'm like, all right, promotional CEO, 80 times forward sales security guy. That's usually like

it's gotten out there and maybe the answer is no. 20 years ago, it would have been like, let's not. And the stock's up. I told the guy, no. I mumbled something weak and pathetic about like a Russell rebalancing or something lame, right? And then it's up 30% since then. And I know the guy's never going to ask me for investment advice again because I screwed him with my initial answer. And the next time he asked me, I'm just going to say yes, right?

Like this guy's not the top anymore. This guy's a leading indicator for the next 30% of momentum. You know, today the stock acts bad because we have a big rotation. It is the most expensive. Well, it's not just today. It's the fifth straight down day. It's the worst streak since March. It's left today, too.

It's others that are moving at lower. But I think that one's different than the broader stuff that the team's talking about with the MAG7, who have had good earnings growth, pretty solid margin expansion, et cetera, et cetera. I think if you're bullish on equities like I am, the two things you struggle to deal with when somebody says, aren't you worried about this, which you're the master of doing, which I appreciate,

one is, aren't you worried about the CAPEX and return on that? And the timing of that. Yes, I am. I don't know how to time. I mean it perfectly. I think anyone who's bullish is going to say... Well, opening up Sam Albin the other day was talking about, Lori, the CAPEX that all these companies are doing. He looks at the trade and he suggests, well, I don't know, maybe it's a bubble. Maybe there's a bubble that's forming. Maybe it's not fully formed. Maybe there

is a long runway to actually form it. Who knows? Greenspan was four years early. Look, I'll say on the AI theme, what I feel like I've learned by reading through transcripts and listening to companies. And frankly, comparing the AI companies to the other kind of cohorts in the market, it just still feels very early days. And you can make a call on whether or not you think this all works in the end or not.

But it feels like there's a lot of runway here. And the other thing I noticed in this reporting season that's winding down right now, we've got some companies saying demand has been delayed because of policy, things have been pulled forward. The AI-related companies, you know, and I'm not necessarily thinking about the biggest ones, but just anyone sort of tangentially involved.

in this. It seems like it's pretty steady state and things are plowing ahead and to the extent there has been some retrenchment on uncertainty. It doesn't really seem to be affecting that area of the market right now. I'm looking on a six to 12 month time horizon and that's good enough for me. I want to make a point to what Adam was talking about. I guess in some ways where we stand sort of depends on where we sit. I think of broadening from the perspective of the financial advisor community that's been told for years to diversify portfolios and have now been sick. in a world of 10, 15 years of mega-cap U.S. growth stocks outperforming and really wondering, should they own non-U.S., should they own small-cap stocks?

So, yeah, 55% last I checked of the companies listed on the New York Stock Exchange are trading above the 200-day moving average, right? That's about average. So it's not the extreme levels that we saw in 2024. But again, there's a lot of investors scratching their head wondering, is there anything else to own besides mega-cap U.S. stocks. And can I just jump in? I think you make a really important point about thinking about who we're all talking to.

On the small caps, which are sort of the prism for broadening, there's the hedge fund community and they're sort of the long-only kind of retail investor, longer-term holders. Frankly, the people who are going to make a bet on small caps because of the Fed, that's the hedge fund community. That's very fickle money with this space. And we've seen it time and time again that they dial up their Fed cut expectations. They move in. They get a little bit over their skis.

and they turn around and sell them. Because I have to have these conversations explaining all this to the small-cap long-only community. And we've been going through this for the last year and a half just about every time I meet with a small-cap PM. And the reality is for the longer-term, stickier money, some of your clients, for my clients, my PMs, to get those inflows, we need a hot economy.

We need accelerating jobs growth. We need ISM manufacturing to be moving up. Absolutely. And we're not seeing that in the consensus forecast right now. We're stuck at 1.7% GDP forecast for next year. You really typically need GDP above 2.5% to get that sustainable move. That's why you still have the, we're late cycle, we're late cycle, we're late cycle, and why there's maybe a one step forward, two steps back rather than the other way around for that kind of trade.

Yeah, I agree. I mean, look, again, I can't answer, and it seems like we're kind of forming a consensus on the topic of when we will see people are innocent until proven guilty on the hyperscalor capbacks. I think we all get the sense it's too early to get panicked about it. Oh, but you think that the other part of the trade is guilty until proven innocent. I'll reverse it on you. I think that it's from the beginning. We were told the productivity from AI will come second half of 26 into 2027. Disproving that here in August 25 is impossible. Okay, meaning as long as all this investments results in a broad group of companies telling us they're able to predict their employee and customer behavior better and drive margin expansion,

as long as I still believe that's coming in 2027, I don't think I want to get too negative on U.S. equities, what's called 18 months anticipatory of that. So that's like another, I guess, kind of North Star or whatever that I'm facing with, which is, you know, I want to buy high quality names with exposure to AI trade. If they're down 10, 15%, therefore I don't think they're going down very much. How about the most north of North Stars? I mean, Fed cut. Don't fight the Fed. I agree.

So to your point, when you were talking about, you know, is it late cycle? It doesn't feel like it. In typical late cycle, you would see credit spreads moving higher. incredibly tight. You would see bankers tightening lending standards. They're not. You would see the Fed having to grapple with rising inflation expectations. They're not. I would categorize this as more mid-cycle, a slowdown in the middle part of a cycle. And at this type of a slowdown, you need a policy response. And I suppose we'll all be listening at Jackson Hall. My invite got lost, but we'll all be listening Jackson Hall to see what we get in it.

What do you think is legitimately riding on this week there then? I mean, I think the market's basically expecting, I don't know, can we categorize it as a cautious cut in September, meaning we'll start to bring rates down slowly from what is probably a little bit too restrictive. That's a hawkish cut. A hawkish cut or a cautious cut. Yeah, that's probably the reality, which brings you back to mega-cap quality stocks again. You know, to Lori's point, where's the re-acceleration and economic activity? Now, and look, our house view at RBC has been December, not September.

Right, and as we're sort of navigating this with clients, you know, that does seem to me like one thing that could instigate a little bit of volatility in the market in the short term, especially if it kind of kills this broadening trade that people seem to want to go to. Well, that's why I brought up at the very beginning that this whole idea, this whole conversation gets answered by what Powell says on Friday. If it's deemed to be more doveish, the broadening trade is legit for a little bit, maybe, would seem to be. and if he's more hawkish, maybe the market is unsettled, but at the very least, if there's going to be money going into equities, it's going to stay at the place where you play offense and defense and special teams. Maybe what I like independent of all this is the financials, because it used to be the only way I could buy financials was I had to make some call on the twos tens,

the slope and level the curve, pray that I'm right in the Fed, and I buy some regionals. Listen to you guys makes me think, you know what, I can own JP Morgan Goldman Sachs and Morgan Stanley. You want a bet against Ted Pick and Morgan's? Stanley, good luck to you. Okay? I think those stocks are going higher. I don't think it matters what happens in Jackson Hole over the next three to six months. They're in a million businesses that do well. You want to bet that things improve in M&A and IPO? I'll take a shot

at KKR and Blackstone and Apollo and Ares. Why not? You want to bet that Capital One to get synergies out of Discover? I think they will. So like I'm looking at the financials thinking like they kind of win no matter what the heck happens in. Where is it, Idaho? I think we're okay. Idaho? Wyoming? I get confused between the private plane events that I'm not invited to. Sun Valley and I get confused between Sun Valley and Jackson. Adam and I are going to watch together on the couch. Once we get west of a JFK, between JFK and SFO. There's a really big, beautiful country out there between California, New York. I'm messed up. I'm messed up. I got confused between Sun Valley and Wyoming because I haven't been to either. But like, that was a great line.

You lost your invite. I like that. Do you agree with those financials work? I like the financials. Yeah, we've liked the financials all year. And I think as long as you can assume we're not going to go into a recession, I think they're a buy. And that's, you know, we don't think that's on the horizon. We have said to people, if there are economic concerns that return, they're going to underperform in the short term. That's just an opportunity to buy them. The valuations look good. Their earnings revisions, frankly, have been almost as strong as what we've seen in tech,

if you look at the rate of upward revisions in this past reporting season. And I've been really impressed with the commentary that we got in this last reporting season. and they're managing risk very well. And they're the big deregulation play. All right. That was 20 solid. I enjoyed it. Guys, thanks.

I also complimented Morgan Stanley. You only pick on the criticism, not compliments. You only did that because you used to work there, and you probably know and like Ted Pick. Otherwise. Story checks out, but I'd also say, Benny against them has been stupid. Look at the stock price.

Okay. All right. We'll see you. Thank you, everybody. All right. Where are we doing? We have 10 minutes before the closing bell. No, we don't.

We have 40. What am I talking about? Let's send it to Christina now for a look at the key stocks we're watching. What do you mean? What do we doing? You're talking to me now. Home Depot shares climbing after the retailer maintained its outlook for the year, despite worse than expected results for Q2. The CFL told CNBC, they continue to see the effects of a, I'm not going to do it right now mindset from home. I should say homeowners, but they're encouraged by signs such as climbing big ticket transactions. And that's why you're seeing shares up 3%. Meantime, Netflix shares, on pace for the worst day in about a month as part of a today's rotation out of tech stocks that Scott was just talking about, likely seeing some profit taking as shares have climbed more than 35% this year. Shares are down almost 3%. And then we're going to finish with shares of Tegna. Higher after Next Star agreed to acquire the rival local TV station owner at $6.2 billion is a deal that includes debt. The move will expand Next Star's presence in nine of the top 10 U.S. television markets. And that's why you're seeing Tegna up 4%. Next

half a percent down. Scott, what is it? 39 minutes left. A little less than that. Thank you, Christina Parts of Nevelos. We're just getting started. Up next, Bill Miller the 4th from Miller Value Partners is back with us. He'll tell us what he thinks about Bitcoin from here.

Big Believer, as you know, it's pulled back with some of these high-flying assets as well. We're live at the New York Stock Exchange. Dow's down about 43. We're back in two. Welcome back from Palantir to Bitcoin to the mega-caps, several high-flying parts of this market have lag lately, leading some to wonder whether a broadening is, in fact, in the early stages. Let's bring in Bill Miller the fourth. He's chairman and CIA of Miller-value partners. Welcome back. It's good to see you.

Great to see you, Scott. Thanks for having me. You're a believer in that premise, aren't you? In the broadening of the market, absolutely. I think what's really interesting is if you look at last week in the Russell 2000 index on Tuesday, 90% of the names of the index were up. And then on Wednesday, so that was the first time you'd seen that level of breadth in over three years. The following day, Wednesday, you saw over 80% of the names that were up. That's a breadth thrust. And that often happens at major influx.

points in the market. And, you know, we think there's a reasonable probability that over the next few years, we see a similar environment to what we saw between, oh, 1999 and 2006. You know, at that point, large-cap growth stocks, over that period, large-cap growth stocks lost 30% of their worth, while the small-cap value index nearly tripled and effectively outperforming the market by 20% per year, or the large-cap growth segment by 20% per year for seven years. And again, we see a similar macro setup, and then we got low, but a little bit rising unemployment. we have inflation that's largely brought under control with monetary policy makers being encouraged to ease. If you look at what's going on right now with the change in leadership of the Fed,

along with potentially increasing access to capital for housing, you could see a very similar environment to 2000 to 2006. So from our perspective, you want to actually own small caps, cyclicals, and you want to be very aggressive here. Can't you, I'll come back to you on the very aggressive notion in a minute, but can't you make the argument that the price action that you, referenced from, you know, earlier last week in small caps specifically was the market over its skis on the idea of rate cuts. And then we got, you know, some inflation data later in the week, PPI and otherwise, which suggested that, okay, maybe the Fed's not going to do what we thought.

And then that's why you saw the small caps unravel the way they did towards the later stages of the week. Well, that's possible. But at the end of the day, the policymakers want the economy to grow. They want inflation to be stable. The bond market currently expects 2.6% annualized inflation over the next two years, very manageable. And one thing that I think is often not talked about when you think about the relative discrepancies between large growth and small value is the valuations. And so what you're seeing, at least with Mag 7, is very high valuations relative to the rest of the market and everything else at a time when their capital intensity is going through the roof. So I just looked at this before the show. Five years of

ago in 2020, the Mag 7 had about $100 billion in CAPEX and 320 billion operating cash flow. And then last year, 550 billion operating cash flow. It looks like they're going to spend about 350 billion in CAPEX. So you've gone from under a third of operating cash flow in CAPEX to now a much higher number over 60%. And so will all this pay off? Everyone thinks it is. Everyone's optimistic about it. But those are some big spending numbers. And we have yet to see whether it'll be justified over the long run. I mean, are you, you talk about capital intensity, your words, as a negative rather than the positive that others see that if you're going to build all these digital roads and these

pathways into the future, it costs a lot of money to do it. And it's obviously going to pay off. It just may not pay off on the time frame that some want. Well, maybe. Or it could be the case that everyone's spending the same money in the exact same or similar models that at the end of the day may not end up being that different. And so then they're going have a price worth at the end of the day. Who knows how it actually plays out. But, you know, from our perspective, there are some compelling values in the space. I think Alphabet is the

value investors way to invest in AI when you look at the assets they have. Not only are they creating the models, they've also got the distribution between YouTube, search, Waymo. So you've got a lot of shots on goal at Google. It trades at a discount to the market, despite having much better growth, much better moat and everything else. So we like Alphabet a lot. Well, since you went there and you mentioned a moat, I mean, the reason why you can make an argument that it trades at such a discount to the others is because some question whether the moat's been breached. And what looked like a moat maybe isn't because of some advancements in AI that are going to cut down on what was an overwhelming amount of market share.

Yeah, that's a fair point, but at the end of the day, they are in seven out of ten people's hands all day, every day in the Android operating system. And that's a moat. So that's not going away anytime soon, and they'll figure out a way to make money on it. Bitcoin, let's hit that before I let you run. I mean, what do you make of it? It topped what, 120 or so, and then it's been pulling back of late. Now, maybe that's correlated to growth and momentum and a little rollover as we've seen it there. Do you think that is the case? And what is your outlook from here? I do think there's some correlation there. I think a lot of it has to do with Secretary Besson's interview on Thursday

when he said the U.S. wouldn't be buying Bitcoin or wasn't planning on in the near term. And then he later tried to walk that back to his social media and said they would do it. They would explore budget-neutral ways to do it. But I think sellers are missing the forest for the trees here. If you look at two days before that interview, the Fed actually ended their supervisory program on novel activities. which effectively means crypto banks. And then a week prior to that,

President Trump signed an executive order directing the Department of Labor to rescind prior guidance that effectively kept everyone in retirement plans out of digital assets. There's still legislative work that needs to be done there, but that's massive news. So there are 60 trillion worth of assets globally in retirement accounts with zero allocation right now

to digital assets. Every 1% allocation from that $60 trillion adds $30,000 to, to Bitcoin's price. And so from my perspective, a 2% allocation would be conservative when you consider that all of those assets are currently in a monetary framework whose authorities have told you they want to depreciate it by 2% a year. So why wouldn't those accounts stick 2% of everything denominated in melting ice cube and sticking in another protocol altogether? So again, that would just, that alone would take us to Bitcoin at 175K or up more than 50% from here.

We still think we are incredibly early. We're still seeing early signs of institutional adoption. You look at Norgis, the world's largest Southern wealth fund, almost $2 trillion in assets has been increasing its exposure to Bitcoin digital assets. It's still a rounding error for them. But when the world's largest sovereign wealth fund, the world's largest endowment in Harvard is now buying Bitcoin, starts to do it. That opens up the door for all the other relevant parties, other endowments, other sovereign

wealth funds to do this in a very interesting way. So, you know, we think we're very early and the domino's falling. Most of the world has zero allocation digital assets still, and we think there's a very long roadway ahead of us. All right. We'll see you soon. Thanks for the time, as always, Bill. Appreciate it. All right. Up next, Alianz is Mohamed El-Ary, and he's standing by. He'll be right here at post nine. He'll tell us what's going to happen in Jackson Hole. What should happen? What it means for the markets next. All eyes on Jackson Hole starting tomorrow as the Fed begins. It's. annual gathering. Fed Chair Powell speaking on Friday with no one quite certain what he'll say

about the road ahead for rate cuts. Here with some insight is Muhammad L. Arian. He's Alihan's Chief Economic Advisor with me here on sets. Good to see you. Thanks for having me. You think you know what he might do this week or say? I don't. I think he will be inclined to maintain maximum policy optionality. And that's not what the White House wants to hear. That's not what many people in the market want to hear. He's also going to be pushed on the labor market, that's the topic of the symposium. And then finally, and something that we don't talk enough about, is the monetary framework. This is when he unveils the monetary framework. Do you think that it would be a mistake to maintain this optionality? Why shouldn't he do that?

We just came off a week in which we got some, you know, inflation data that was at least a little bit hot, sticky if nothing else. How's he wrong? So now we're starting to, see the problem with excessive data dependency. He got two different inflation numbers. He got softer than expected CPI. He got hotter than expected PPI. He got a UMIS survey that is flashing yellow. If you simply look at data, by the time you get a clear indication of what you should have done a few months ago, it's too late. And that's the problem with this data dependency. But, I mean, this is the criticism of feds for decades. No, it's not.

Most Fed shares had a strategic view of the economy. Greenspan had a view of productivity, and he had that view. Bernanke had a strategic view of the economy. Yellen has a strategic view. This is the first Fed share that is almost wholly backward-looking, and that's the problem. We can't make the argument that Powell's the only. The reason why people say the Fed is always late, let's be honest. has more to do with this current chair.

You don't think so? No, I think there were times when the Fed was early. Greenspan was early in recognizing the productivity boost. He didn't tighten at a time when he said, you know what, the supply side is changed. And he was absolutely right. Okay, Bernanke waited and waited before he raised rates. So there has been a strategic view of where we're going. This Fed, and I understand why, the one strategic,

view they took, 2021, inflation is transitory. Yeah, they made a mistake. They made a huge mistake. And because of that, they've become really shy about making that. They don't want to make a mistake again. They don't, but they may end up making the mistake. By being too late. By being too late.

You think that he should cave to the political pressure from the president? I don't think he should cave. I think he should cut for the economy. So I look at the labor market. The only indicator that allows me to sleep at night is the unemployment rate, 4.2. It's remained steady. It has remained steady, and that's the number he's looking at. But if you look at other indicators of the labor market,

if you listen to what the companies are telling you, if you look at what's happening to people graduating from college, this is a labor market that is softening at an accelerating rate. And you have to be careful about this. I mean, I listened to Brian Moynihan when he was last on our network, and he said there's a difference between job growth slowing and job losses. So the labor market growth rate is obviously, slowing to some degree. We haven't seen anything to raise any kind of alarm, not even a yellow

on layoffs, have we? So we've seen the start of a yellow. Scott, history will tell you this is not linear. Think about it. When job growth stops and when people start making layoffs, other companies use that as the opportunity to do things that should have done for a long time. And that's why the labor market doesn't change in a linear fashion. It changes a while. And Then you tend to get these steps down. And that's what I'm worried about. Okay, so they should cut in September. They should have cut in July.

Okay, but they didn't. July's in the rear view now. They should cut in September. They should absolutely cut in September. They should absolutely cut in September. I would cut by 25. I wouldn't be super surprised if we get a repeat of last year. Remember last year they absolutely didn't want to cut in July and they cut 50 in September.

If you ask me, that's the 20% probability. If we get a bad labor report before the September meeting, they'll cut by 50. But what if he wants just more optionality for another inflation report? Then we risk being late. And what we have to realize, and I know this is the least popular thing that I can say, is that we have sticky inflation at two and a half to three percent. As long as inflation expectations are anchored, we can live with a slightly higher inflation because the structural side of the economy is changing.

It's changing in so many different ways. Okay, so you're saying it's changing to the degree where 2% doesn't matter anymore? 3% is the new 2%. I'll go further. I say it's changing in a way that 2% is the wrong inflation target. Unfortunately, Chair Powell has ruled out looking at the inflation target as part of the monetary framework. Well, he doesn't want to be the next Arthur Burns either. I mean, that's a key view that he's held for a long time. Yeah, but he also is the chair that has had four years of inflation above 2% and we keep on being promised 2% down the road and we continue to be promised 2% down. Of the 11 that are allegedly in the pool for the next chair would be the best, you think?

So I think there's quite a few that would be good, right? Of the ones I know, which is a much smaller set than the 11, I think Kevin Walsh would be a very good Fed share. Why do you think so? Because I think he has the experience of having served on the Fed. He has a sensitive feel for the market. He's an economist, so he has the sort of gut feeling about he cannot. That's really important when you are a Fed chair. So I see him, but I must tell you, I don't know the 11 well, but I have witnessed him.

I saw when he was a Fed governor, and I've been very impressed by him. If Powell doesn't cut in September, do you think the President fires him? I don't think the President fire has him. I think the President goes after the Fed in a way that can seriously undermine central bank independence. And if that happens... You don't think that's already happened? No. But I think that they are looking for it.

for calls and like any institution, the more you look into it, the more you're going to find things. And I worry about central bank independence. But to be clear, I say there's an economic argument to cut. I don't go on the political side. There's an economic argument to cut. No, but you've made, you put yourself out there by suggesting that he should resign to preserve independence. Correct. You can't say that and then and then lean more heavily now on the economic side. But I say resign because he's going in May, not. No one expects him to stay. No one.

Pretty soon he's going to be a lame duck. So what are you talking about? Two to three months. Is it worth protecting the independence of the central bank for two to three months? Absolutely. If he really cares about the Fed, he would be thinking about this right now. Some would make the argument that he should stay for the exact same reasons. But that's why we continue to have this debate.

Mohamed, thanks for being here. Thanks for having me. It's Mohamed El-Aryan joining us. Up next, we check the biggest movers as we head into the close today. Christina's back with that. What do you see? Tip stocks. Diverging on Fresh China Trade.

developments and a major investment surprise. Those movers next. Let's get back to Christina now for the stocks that she is watching as we head towards the close. What is at the top of the list now? Well, I can say chip stocks because that is my beat, but they're mixed today as China trade dynamics really shift the landscape. NVIDIA confirmed it's evaluating, quote, a variety of products for China following reports of a more advanced AI chip in development. Reuter says test samples could reach Chinese clients by next month, timing that really aligns with President Trump's hints about allowing these more advanced chip sales, specifically Blackwell, to China. But I'd like to point out, shares are down about 3%. Today's sale off may actually reflect Asia press reports that NVIDIA plans to hike H20 chip prices.

The move would help offset the 15% revenue share, both Nvidia and AMD have agreed to pay the U.S. government on China sales. So that's possibly why you're seeing the reaction. AMD and Broadcom are also trading lower on concerns about increased competition if Nvidia's new chip enters the market. So they're all just so intertwined. But Intel is bucking the trend. Shares are up after SoftBank announced a $2 billion investment for a 2% stake in the company. Our U.S. Commerce Secretary also confirming on CNBC earlier this morning at 10, 10 a.m. that the U.S. government is looking at taking already allocated chipsack funding to buy

a 10% stake in Intel. The vote of confidence from SoftBank and the cash infusions are definitely helping shares climb over 6% higher, Scott. Yeah, as you would expect, they would. Christina, thanks. Christina Prattanova. Still ahead. Viking Therapeutics plunging in today's session. We'll tell you what's dragging that name lower coming up. We're back right after this. We're now in the closing bell market zone. CNBC senior markets commentator. Mike Santoli here to break down these crucial moments of the trading day. Angelica Peebles is going to tell us what has Viking therapeutics plummeting today and

Diana Oleg standing by with what to watch for from Toll Brothers, those earnings in OT. Angelica, we start with you. Hey, Scott, well, a big day for Viking, and that's after the company reporting disappointing data for its obesity pills. So the drug helping people lose about 12% of their body weight after three months at the highest dose. Now, that's a competitive number,

but the side effects here is what's raising concern. So among people who took the drug, 28% overall stopped the treatment with 20% of people stopping because of side effects. Now, we're seeing those same gastrointestinal issues that we've seen with other GLP ones, but high rates of things like, like nausea, making investors question just how many people will tolerate a daily pill like this.

Viking says that it'll increase the dosage that people take more slowly over time. So they'll space it out, let people adjust in that phase three trial. So it's possible that they might be able to improve the tolerability. But clearly, there is concern about the future of this pill and just how competitive it might be against Lily and Novo Scott. All right. Angelica, thank you for that. That's Angelica Peoples. Diane Oleg, tell us about Toll. Well, toll is, of course, the luxury home builder, so it is far less sensitive to mortgage rates than other builders are.

And that's probably a good thing, because while rates did come down a little bit from the start of its fiscal Q3, they didn't move much at all. And the bigger drop came in August when its Q3 was over. Close to a quarter of toll buyers paid in cash in the last quarter. And Toll did report a record Q2, beating an EPS and revenue and home deliveries all well above expectations. So the question is, can they do it again? We'll be watching net sign contracts as well as margins as consumer sentiment weakened during the quarter. And prices for construction rose. Back to you. All right, Diana. Thank you. Diana. We'll be watching. Mike Santoli to you, a day that was all about rotation.

Yeah, and really a pretty nasty little riptide that dragged the big NASDAQ names lower. We've seen similar momentum reversals before, this little rethink of whether we've overplayed in the short term, the AI, investment hand. I don't know that it's conclusive today, but it's very telling just exactly where the pressure is being applied and the laggards are being picked up. To me, it's mostly not news-driven, but it's atmospheric conditions. We knew valuations rebuilt. We knew concentration got to the extremes once again. The meta story seems pretty noisy, and maybe it means we're thinking that we're no longer in the literally everybody wins phase in AI. It looks like July 2024, but it doesn't have to be that much of a decisive reversal, I don't think.

Back then, the S&P 500 was basically capped for two months. Final note, no love for the Russell 2000, right? So you're rotating out of mega caps. It's not about small caps. Right. There's a weak hands that buy every Russell 2000 rally, and they're getting shaken out once again. Finally, we're not even back to last Monday's lows in the S&P. So it's still just a modest wobble at this point.

NASDAQ, obviously, getting hit the hardest today, down about 1.5%. Bell's going to ring. Dow's going to fight it out to the last second here to see if it can go green, but otherwise it was a day out of momentum, out of growth, and out of tech. And that's out for us and O.T.