Closing Bell - Closing Bell: The Fed, Rates & Mega-cap Earnings 1/28/26

Episode Date: January 28, 2026

DoubleLine’s Gundlach weighs in on the Fed’s decision to keep rates steady. He tells us when he thinks the next cut might be and what it might mean for the money. Plus, investors closely tracking some big mega-cap earnings today. We run through what to watch from Microsoft, Meta and Tesla. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Chair Powell saying the economy is on firm footing, consumer spending resilient. Conditions appear to be stabilizing in the labor market and that the Fed is, quote, well positioned to determine our next move on rates. I thought it was notable that the very first question of that news conference was on why he attended the Lisa Cook hearing before the Supreme Court. He said he did so because it is perhaps, quote, the most important legal case in the Fed's history. Ask for other questions about politics on the subpoenas related to the investigation. Wouldn't expand on that at all. This is really about the economy and what we did today, and he certainly did his best to bob and weave, if you will, around anything of the political type of question that he did get. Welcome to the closing bell. I'm Scott Wobner here at Post 9 at the New York Stock Exchange.

We will check the markets, of course, as we progress here in the final stretch. Stocks are somewhat muted today following the statement, and then that news, conference. The S&P, though, did hit 7,000 for the very first time ever earlier today, and that is obviously notable. Rates moving up just a little bit, particularly the two year after no move today, and perhaps uncertain about what the road ahead is for interest rates. The dollar up a bit, and it's been down, certainly at four-year lows. Gold and silver have been running a lot, and that trade is still on. Look at silver, up more than 8%. We do have mega-caps on tap with their earnings after the bell in overtime, and we're going to walk you up to that.

as we always do. We are going to begin, though, where we always do that. And that is right when the Fed Chair is done, we welcome in Jeffrey Gunlock. He's the double line founder, the CIO, and the CEO. Welcome back. It's nice to see you. Nice to be back again, Judge. This is our 41st post-pressor interview. So the train keeps rolling. I thought that your introduction was spot on. I usually have a phrase of the meeting. I thought the phrase of this meeting was, I got nothing for you on that. And not just on the political probing, which obviously he wasn't going to answer those types of questions, but just also pretty much the update on the markets, the economy, and the mandate.

You know, I always start with the two-year Treasury when I think about Fed policy. Well, the Fed got in sync with the two-year Treasury with their last rate cut in December, and we're right on top of the Fed fund range. The two-year treasuries at about 358, and the range for the Fed funds rate is three and a half, so three-and-three-quarter, so three-and-five-eight's at the middle. So we're dead on there. And we've seen very little movement in rates since the Fed's last meeting. What's really happened, as I said earlier, the train keeps rolling on.

We keep seeing the precious metals now being joined by commodities broadly, although since the metals, gold and silver and copper, are an important subset of the Bloomberg Commoddy Index. Obviously, they're helping drive the index higher. But the Bloomberg Commoddy Index is well above its nicely rising 200-day moving average. It has been now for a while, and commodity trends tend to be pretty gradual and long-lived, and they get frenetic, as we've seen, in gold and silver. But commodities broadly are strong performer in recent quarters. as are my favorite recommendation, which was local currency emerging market, stocks, and bonds,

which have really done well, not only because those indices have outperformed, but as a dollar-based investor, you've got a currency translation when the dollar's weak. And my central investment theme now, for about two years, has been center your portfolio positioning around the idea that the dollar is going to be secularly weak, even if the economy weakens, because it would lead to a fear on long-term debt, and we would continue to see dollar weakness as debt servicing comes into play. That's been the case since the last meeting. It's been the case for a while. One of the things, and our portfolios have been remarkably well positioned for this time period, largely because we've been sticking to this theme of dollar weakness and ultimately precious metal strength and foreign markets outperforming.

One thing I'd like to talk about for your listeners is one of the things I've learned over 40 years in this business One of the thing I've learned is that the hardest thing to do when you've got a really good investment thesis is to decide when to change it It's really hard even if you've been really right. It's really hard to change in fact it's almost more hard to change when you're right Because you're being rewarded psychologically You know and and and and economically But I'd like to say that while we've been on the right track we've been on the right track we this thesis, I have not made any changes to the way of structuring portfolios. In fact, the most recent moves I've made with my own personal money in asset allocation

are to buy more gold miners back in June of 2025, which turned out to be remarkably lucky timing, and land. So I continue to like the idea of having real assets, things that will protect you from currency movements, And I saw a podcast with my friend, the great Jim Grant, and he said, the price of gold is the reciprocal of investors' confidence in central banking. And I think that that's what's been going on with those medals. So really good year last year for just about everything except oil and the dollar. You made obviously a great call on what you thought the dollar was going to do.

Well before on December 10th, when you told me again that you had, expected the dollar to weaken. I'm wondering what you make of the commentary over the last 24 hours. The president being asked directly about the weak dollar in which he said the dollar is great. The Treasury Secretary this morning on this network said the U.S. always has a strong dollar policy. I'm wondering if this is one of the instances where you should look more at what they do than what they say, certainly in terms of what the Treasury Secretary says. said because it appears as though they're very fine and happy with the fact that the dollar is doing what it is doing.

What do you think? Well, since they're so in favor of slashing interest rates further, I mean, I know the president says that repeatedly, and the Secretary of the Treasury's has got on board with repeating that rhetoric. Since they want rates down so much, they've got to realize that that's going to weaken the dollar if the dollar is falling relative to other currencies due to we start. slashing interest rates further when, as Jay Powell pointed out, there's really no reason to do so. But if you slash interest rates then, you're not only running a weaker dollar policy, but you're running an inflationary policy.

So I continue to like this idea, although it's a very crowded trade now. We started this two years ago plus, thinking that the long end of the yield curve was not going to do well, that the dollar was going to be weak as interest rates would be cut sequentially. And that continues to work, but I do notice that long-term interest rates have stabilized. Just like Jay Powell pointed out that the unemployment rate has somewhat stabilized and that the dual mandate isn't in so much tension as it was in the second half of last year. I felt like this was almost an echo of some of the commentary last January, which I thought was Jay Powell's best ever attitude.

He was really feeling it. He really thought sincerely, he articulated that policy was in a really good place. that the dual mandate was back in sync. You know, inflation was falling, unemployment was low. And that got kind of blown up in the second half of last year, as inflation proved to be stickier and coming down slower and the unemployment rate started rising. But now he's talking about less tension between both sides of the mandate.

And I really agree with that. And I think he's setting the stage. You know, he only has two more meetings. I think I would bet pretty heavily that there's not another rate cut under Jay Powell. I think he's going out of his way. to emphasize that inflation is a little elevated, but not as bad as maybe it was feared a few months ago, that the unemployment rate is no longer, it's not really rising in any kind of meaningful way, and that being supported by the fact that while there's not much job growth, you know,

there's not really labor force growth either, so it's in balance, as he pointed out correctly, in kind of a strange way. So I'm not surprised that the markets aren't doing that much year today, but once again, in this first less than one month of 2026, what's outperforming? It's the precious metals, it's commodities, it's non-dollar markets, particularly local currency emerging markets, which is really one of my strongest recommendations. So I still recommend a relatively small allocation, maybe 30 to 40 percent stocks, but all of them, basically. I know this is risky for dollar-based investors, but I have conviction on this. all of them should be in non-dollar markets in the non-dollar currencies.

I think that's going to continue to be a winning trade. I wouldn't put 70% in something like that. I still like what's performed well, bonds did well last year, particularly, really, credit bonds did well. Their spreads came in. Interest rates broadly created gains in bonds, not so much for the long bond, but particularly for the belly of the curve that we're involved in. I still like that strategy.

I'm not changing anything. Spreads are very tight versus treasuries, but there doesn't seem to be so much risk at this moment at these spread levels as we might have been concerned about in past periods because I believe a lot of the risk in the public bond market has been absorbed by the private credit market, which continues to have headlines that are showing up with kind of a drumbeat of deterioration in results.

not performing public credit anymore, private credit isn't. And we're starting to see write downs of some alarming magnitudes, which I think will be plaguing that industry in 2026. So I greatly favor public markets over private markets. I have for about 18 months, and I think that's going to be a major theme over the next year or two. Let me come back in a minute, and you've certainly made a headline with your call

that no more rate cuts will happen under Chair Powell, during his term. Steve Leesman, our senior economics correspondents, come out of the room where, of course, he asked a question as usual. So I'm wondering if that's the feeling you got as well. Steve, as I would suggest, this to me didn't sound like a hawkish chair

or a doveish chair. It sounded like a sanguine chair. Like they are very comfortable. It sounded like to me, Jay Powell is on where they are. maybe more so than they have been in a while. Yeah, I like the way you put it, Scott. I like the way Jeff put it. The way I would put it is, if you ever been at the helm of a boat that's rocking back and forth,

and in this case, the boat of either the economy or the Fed, rocking this way towards tension on the employment side, weakness there, rocking this way, it's not a time to hand off the wheel. It feels like Powell has a sense now that the boat is stabilized with this notion, of less tension on both sides of the mandate. That really is in the statement. I believe it was in his words that he said. In fact, let's listen to what he said about where we are relative to neutral here. This is the higher end of that range, but it's for some people they think it's neutral. I think, and many of my colleagues think it's hard to look at the incoming data and say that

policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder, and of course, no one knows with any precision. So I think, Scott, just to sum up, I think that Powell thinks he has the economy, Fed policy, where he wants it in order to hand it off to the next person. I don't think there's going to be another rate cut under Powell. But I do think the conversation needs to move on from that, and probably will do this tomorrow, Scott, which is what happens after Powell? The way the market is priced right now for not very much cutting in the wake of Powell, there's two cuts built in with not a whole lot of confidence in futures markets.

The two years not trading very much like it sees a guy coming in with rate cut guns blazing. So that's what's of interest to me. Powell has it where he wants it. But the next person coming in, not much pricing in the market for additional cuts other than this 50 basis points out there, plus or minus. A sign of the times, no doubt, that the very first question, as I mentioned at the very top of coming on the air here after Chair Powell was finished, was that the question was about why he attended the Lisa Cook hearing in which he said he thought this was, quote, perhaps the most important legal case in the Fed's history. I thought it was interesting how he responded to the question, what advice would you give to your successor in which he emphatically said, stay out of elected politics, don't do it, and then gave an impassioned defense, I think. thought of the Fed staff. What'd you make of that? Well, Scott, I came in with about a half a dozen

questions I wanted to ask him about the video that he made, January 11th, about issues about Fed independence. It seemed to me like he shut the door on those, and I did have a bunch of questions about policy, so I asked him that. But I think he said what he had to say in the video about Fed independence. He did what he did, and his action spoke when he showed up at the Lisa a Cook hearing. I don't think Powell wants to be where he is right now, but the reality is the Department of Justice has launched a criminal investigation. He feels very strongly, Scott, that that criminal investigation is an attempt to impinge upon the Federal Reserve's independence, and he wants to preserve that part of the steady ship that I think he wants to give the helm to

to the successor is one that is not under constant attack, one where the president has the right to come in and fire governors. I think that's what Powell wants to hand off to his successor. Good to talk to you, Steve. Thank you. That's Steve Leesman, our senior economics correspondent. As we go back to Jeffrey, gunlock, and that's what I'd like to ask you, Jeffrey, what do you make of this investigation into Chair Powell and the Fed? What do you make of the unprecedented manner in which he responded to it a few weeks ago, and then the advice he gives to whoever his successor will be? Stay out of elected politics. Don't do it. Well, it just seems part of where we are right now societally.

I mean, we've got all kinds of people making all kinds of videos and making all kinds of threats against other people. It's just a bad moment for that. And I think Jay Powell got himself caught up with that and regrets it. I think a lot of people putting out these videos probably regret it. So it's just a sign of the times. What's interesting, I thought, Steve sort of alluded to the helm of the ship. I think that one of the things that made Jay Powell seem sanguine. I like that word that you use, Senguin, is that the GDP now has come out at surprisingly strong levels.

I mean, a few months ago, we were worried about unemployment, and now we've decided that we have an explanation for that because of the global balance of no hiring, but no labor force growth. But GDP now, well, GDP, during 2025, the first quarter was officially negative on a real GDP basis, and then it turned positive in Q2, and they got even better with a four handle, at least that's where it is now, might get revised in Q3. And now GDP now, of the Atlanta Fed, it's at 5.4 for the fourth quarter. Now, that might be a little early, but if you put that all together, if we go with that 5.4 GDP now and use the numbers as they stand presently for the first three quarters,

real GDP for 2025 will be 3.2 percent. Nominal GDP will be 6.3% if the inflation forecasts are right. So the inflation, the GDP deflator, that means would be rising over 3%. That is an elevated level of inflation versus a 2% target. And we've been going on for five years now with inflation above 2%. And if inflation runs at 3%, which is what it's running at now, over a 15-year period, you would have a 56% increase in the price level. If you run at 2% over 15 years, you'd be up only 35%.

So 1% difference doesn't sound like much. When you accumulated over a not terribly long time period of just 15 years, you end up getting over a 20% difference in the level of the price rate. So there is a big difference between 2 and 3%. So we do have an elevated level there. But if you look back at the past five years, the inflation rate has been 3.9%. So that's what people are still feeling when it comes to inflation. They feel that prices are elevated. Yes, gas has come down.

Parts of the country has come down phenomenally. You never longer hear about the price of eggs. Egg prices are as low as they've been any time in years. But still you have the K-shaped economy, which is undeniable. We look at GDP and it looks great, but it's pockets that are doing that. You know, it's a lot of business investment with AI buildouts and the like, and it's a lot of high-end consumer spending. So I like to admonish investor analyst, investment analysts, to say, don't always just look at aggregated data.

Because as the economy gets so much more bifurcated and new technologies catch people's imagination and have a lot of CAP-X investment, that doesn't mean that just because on average things are doing well, there's a huge dispersion as you go quartile by quartile or quintile by quintile, decile by decile in people's actual circumstances. And it's that piece of the puzzle that explains all these things I talked about earlier, about people not getting along in videos that people end up regretting. And unfortunately, that's going to be the legacy of these economic policies that revolve around deficit spending. So I think that we need a significant reset on the way this economy is operated, And we're starting to see signs that that might be coming more probable.

We go all the way back to Liz Trust with the blow-up in the GILTH bond market when they started to run indications that were going to run even higher and higher deficit spending. The bond market collapsed. And then we saw a revolt last week in the Japanese 40-year bond market where the yielded up 25 basis points in a day. And then all of a sudden, the intervention comes in. And so I think we're getting closer and closer to that moment where intervention becomes more of a choice on the menu of government policies. And that's why one reason that although I'm negative on long-term treasury bonds still, even though that trade has stalled out for the time being, I'm thinking more and more about what will happen if those rates continue to be stubborn.

will they try to get those rates down to stimulate the affordability of housing, maybe lower the interest expense on the debt? And what would that mean? Well, what it would mean is potentially a very violent rally in the long-term part of the Treasury bond market. I'm not positioned for that. I don't intend on positioning for that this week or this month exactly, but it's becoming more and more of an issue that something funny is going to happen with government finances and the financing of the bond market.

And we've seen tells on this building up over the past five years. You know, it's interesting that you went there because I wanted to ask you more specifically about it. If you look at what's happened with the spike in Japanese yields, there was an interesting piece I thought this week from Black Rock in which they suggested that bonds are no longer a safe hedge. That's how they put it and they looked at the historic spike in Japanese yields. They try and extrapolate from there and suggest that it's a global story, and I think you may agree with this. You have the threat of more tariffs. You have obviously where the deficit is. You have a surge in corporate bond sales, partly tied to the AI buildout.

A lot of leverage in the system as the result of that in and of itself, which has exposed the financial system to shocks just like what happened in Japan, could easily happen elsewhere, to which they are tactically underweight, long-term Japanese bonds, and also long-term U.S. Treasuries, just like it sounds like you are and have real no impetus to change that philosophy or investment idea anytime soon? Well, they must be reading my stuff, Scott, because I've been on this theme for a long time and positioned that way for a long time. And I agree with that. completely. In fact, I think there's tremendous evidence for this because the dollar does not act like a safe haven currency, and it hasn't for a while now. I talked about this in past appearances. Since 2000, there have been 13 corrections or more than that in the S&P 500. The first 12 times that happened, every single time the dollar went up by about 8 to 10% on average, every time, 12 in a row. Last March, April, when S&P went into a significant correction, the dollar did not go up.

It went down 8 to 10%. And what we see as a safe haven appears to be tangible assets. Obviously, gold and silver, not Bitcoin. Bitcoin's down over the past year. It's fascinating that with all the enthusiasm of, you know, sort of star power allure that Bitcoin had for such a long time, it's fascinating that we could have, you know, a 90% reference. in gold over the past 12 months and Bitcoin is down. I think that's a sign of something. I think it has to do with these opaque private markets that seem to be running into incremental

trouble. I think that the people, investors, are starting to look for things that are real. They're more interested in things that are real and getting more sober about things that are hype. And I think that that's going to be an accelerating trend and it's already well underway. And that train just keeps on rolling, as I've said twice now already. Right. Let me, lastly, by the way, I'm assuming that you're the new roundtable prime that you've done, which is your annual conversation, if you will, or plural with some market thought leaders, explores a lot of that. Let me ask you this, because the prediction markets are a buzz with who's going to be the next Fed share. I mentioned what Jay Powell said about his advice to the next one. Stay out of elected politics. don't do it. If they called you and said, who do you think will be best in that seat following Chair Powell of Mr. Reeder and Warsh and Waller and Hacet? What would you say? I think I would go with Waller. I think he's less likely to be manipulated. But you mentioned the Roundtable Prime.

You know, we have Jim Bianco has been on the Roundtable Prime for years, and we're talking about Fed Chair there. And he said, I don't care if it's Kevin Worsh, Kevin, you know, Kevin Hacid or Kevin Kossner. And I thought that was pretty funny. But the Roundtable Prime is up for replay at Doubleline.com. And it's, it's real, it doesn't take forever to watch. You watch it in about an hour and a half, and you can certainly skip around. And I thought it was the best roundtable prime we've had, having done it for about eight years. So thanks for bringing that up. But I, I don't really have an opinion that much about a Fed share. I want somebody that's strong. I want somebody that wants to have fiscal rectitude, and I don't know exactly if any of these would fit the bill for that.

But I'm a steward of other people's money and my own wealth, and so I can't control what's going to happen. All I can do is try to think about it and prepare and make moves based upon who ultimately gets selected and how they start to approach the rhetorical part of being federal reserve chairperson. I'm not really worried about any of these people. I'd be worried about Myron. I think we would be running a very weak dollar policy, and we would be running into a very significant inflation policy if we were slashing interest rates to below the inflation rate.

I think there would be a huge mistake. Well, he was a dissenter today, along with Mr. Waller. They wanted a quarter point cut. So we shall see, and it's always good to talk to you and get your up-to-date investment advice. As always. Jeffrey, thank you. We'll see after the next meeting.

All right, good luck everybody out there. Thanks, Judge. All right, you'd be well. That's Jeffrey Gunlock. Coming up next, of course, we're just moments away now from mega-cap earnings hitting the tape. We have an all-star panel standing by to get you set up for Microsoft and Meta and Tesla. The market zone's next. Now in the closing bell market zone, and we are just moments away now from mega-cap earnings out and overtime. Full team coverage for you today. Steve Kovac looking at Microsoft.

Julia Borson is watching Meta and Phil LeBoe. of course, on the case with Tesla. Two-star analysts on the desk with me here at Post 9. Wedbush's Dan Ives, Evercores Mark Mahaney, and we have two shareholders at the ready as well. High Tower, Stephanie Link. She holds Meta, Capital Area Planning's Malcolm Etheridge. He holds Microsoft.

Mr. Kovac, we begin with you the most important thing to know on Microsoft. Oh, man, there are so many things to know. I can't give you just one. Let's start, though, with Azure growth. Microsoft, as we saw last time, was expecting. 37% growth. The street is looking for 39% growth. Also, another thing to watch is RPO. That's remaining performance obligations and the growth there. We saw that go up 51% last quarter. That's expected to grow more after that recapitalization moment with the opening I deal. We'll also

going to be looking at copilot subscription and usage data, if there's anything there, and also capital expenditures. Now, they did not give guidance last time for what CAPEX would be. They just said It was $34, $35 billion in that previous quarter, so we'll get an actual number, but do not expect guidance there. And then, of course, like I said, that deal with Open AI from October. We learned that Microsoft had that 27 percent ownership stake in the Public Benefit Corp of Open AI. That's valued at $135 billion. And that whole recapitalization effort is going to play in to the financials here in this report, Scott. All right, Steve, this is your appetizer before your apple entree tomorrow.

Thank you, Steve Kovac. Worcston now with meta, which needs to do something different, at least the stock does than it did last quarter. Well, the big number to watch, and I think the big number that will influence the stock, is the company's 2026 CAPX guidance. It's expected to be over $110 billion, according to facts at estimates. J.P. Morgan's saying they expect outside spend this year, but they are looking for greater commitment to financial targets. Though shares are up about 10% in the past week on some bullish analyst notes, comments about increasing spending did spark investor concerns last quarter, and shares are still down about 11% since its last earnings report. As the company focuses on AI, investors are looking to understand how Zuckerberg's both near and long-term plans will justify all the infrastructure spending they're doing.

Scott? Julia can't wait for it. That's Julia Borson. Now to fill a bow on Tesla. What do we need to know here? We need to know what the outlook's going to be, Scott. And we won't find that out. in true detail or greater detail until the analysts call at 530. But we will get a snapshot of where the company is at the end of 2025 and at least a peak into what it's expecting for 2026. For the quarter, they are expected to report a profit of 45 cents a share with revenue coming in just under $25 billion.

As you take a look at Tesla over the last three months, one interesting thing to keep in mind, we might see the first annual decline in Tesla revenue the company has ever experienced. When we get the final fourth quarter numbers added in with the rest. We'll see what all of 25 comes out at. But as I mentioned, the 26 focus, it's all about autonomous vehicles, full self-driving, Robotaxie, the growth in those two areas, as well as the development of the optimist humanoid robot.

530 is when we will hear from Elon Musk. Scott, back to you. And we look forward to that. Phil the boat. Thank you very much. Mark, Dan, Steph, and Malcolm, as I said, are with me. Mr. Mahaney. Welcome.

Good to be here. here in person, all that often, so I'm going to begin with you. Because I feel like meta, this is really the moment. Certainly after what happened after last quarter in the stock slide, 110 billion CAPEX guide. If that is the number, what happens to the number that investors care about most, the stock price? I think the CAPX number is going to be greater than that. I think they're also going to give you total expense guidance for the full year.

The street's got about 150 billion in their models. I think it's going to be greater than that. Then the question is going to be, do they have enough revenue upside to offset that's what's going to be a little bit of a disappointment. So they're going to have to print something like 22%, maybe 23% revenue growth. And if they guide for that for the full year, I think the stock kind of holds. We're 22, 23 times earnings. I think we're rangebound 20 to 25, the PE multiple.

I think that's the range. And I don't really see a big move in a stock one way or the other. If by the guess, my guess is it goes up modestly. Why do you think the stock reacted the way that it did? As we show you on the screen, you can see the big drop off after last quarter's numbers hit. what was the major issue? And it doesn't sound like if investors were overly worried about Zuckerberg's spending, that they're going to be relieved of that anytime soon. I don't think they will be. But we already had that surprise last quarter, and we're down at the lower 20s multiple. So I think some of this

expense fear is already de-risten to the stock. Doesn't mean the stock trades up. But what you need to then do is you need your big two catalyst. You need to be able to talk about moderating expense growth. I don't think we get that kind of language from the company until six months from now, nine months from now. And then you need a product cycle. So you're spending all this money. What are we getting for it as investors? And I think we're going to get that product cycle later this year.

I don't know whether it's a frontier model. I don't know whether it's taking that meta-AI app and making it a lot more engaging or addictive or attractive. But I think it's one of those things that's going to break through for the stock. Dan, you cover it as well. Do you agree with what Mark said? Look, I agree. I mean, 100% obviously, you know, he always has great thoughts. Mahini.

I think my view is that this is really. going to be from a digital advertising perspective. It's our view. AI is going to be a huge talent for the meta model over the coming years. The last thing we want to see them do is pullback spending. And I get the reaction that we saw in terms of the last quarter. But I think they're on the offensive mood. I mean, you see Zuckerberg wartime CEO right now. And I think this stock, and I'd say, you know, in our opinion, there's others like Microsoft, not reflecting when we see the monetization of AI. Okay. So the monetization. We know that all these companies are going to spend.

Why is the monetization of this particular name questioned perhaps more than some others? I think because when it comes to digital advertising, when it comes to all the spending, investors are trying to understand what's the path. When does the growth rate accelerate 500,000 BIPs? When do you see that inflection? When do they? And look, and I believe over the next 12 to 18 months, that's where it inflexes. but I think it all starts to inflect.

This is not just for meta, but for Microsoft, and I think really across Big Tech, the next few quarters, you see monetization. And that's, look, that's the proving me moment right now for Microsoft. That stock has obviously traded, you know, very, very poorly. Like sideways, it's up 7% I think are about there over the last year. Yeah, there is, seven and a half. You can almost draw a straight line as you can with some of these other names, too.

Let me ask you, Steph, as we fixate on meta, for a moment because it does seem to be the one that's brought the most trepidation for investors. The stock activity doesn't lie. What do you make of what these gentlemen up here said? And what are you worried about? Well, I agree with actually both of them. I, by the way, have no problems with their growth rate. I think total revenues are going to come in anywhere from 23 to 25 in terms of revs.

On earnings, I think you're going to see 20%. That's not my worry point. The growth is not my worry point. The worry point is the spend, but I agree with Dan. very much. The last thing I want to see them do is pull back. My only, it's an expectation to game. So that's the only concern that I have. Now, the buy side for OpX is 155 to 160 billion, right? That's a lot higher than what the sell side is at. And of course, the CAPX numbers are also quite high at 115 to 125 billion. That's the buy side. So there's a little bit of a disconnect.

So that's where I think there's going to be a little angst. But I do think it's also going to be interesting to hear about reality labs and do we get the 30% cuts there because that's a $5 billion savings. At least that shows you that they're prudent on that piece of it. And then also what about the Lama, the new model in Lama? And can that actually lead to an unlock new engagement and new budgets? And that's the big question mark too. So I think I'm waiting to hear a lot about that as well. So the growth story is still there, Scott. Absolutely. It's just trying to get the operating leverage, which we haven't gotten. This is interesting, Mark, because it sounds like what Steph is worried about is almost reversed.

Steph's worried about the spend, not the growth. You're not so much worried about the spend. You're worried about the growth rate being large enough to justify what the spend is. And the time frame of when they can achieve that growth to offset the tremendous spend is, is the great unknown. Here are the two really key points of context here. This company has been aggressively investing in AI for the last three years. They rebuilt their ad tech stack. They have the fastest advertising growth model at scale of anybody. Why? Because they've successfully used AI to improve engagement amongst users and improve return on ad spend amongst advertisers.

And this company, when pressed, has shown cost discipline. That's what Zuckerberg did three years ago. He does listen to the stock price. He does listen to the big investors. Investors. He He does. It took the Brad Gersner letter to help them get religion on spending. Are we going to approach another moment where some big investors got to write a letter saying, what are you guys doing? Possibly, but I don't think so. And I really love Stephanie's point, because I think the cost outlook has been de-risk. When you hear the buy side is ahead of the sell side, that tells you that something is de-risk. I think that's the case here. They spent two quarters warning people, hey, we're going to ramp up expenses in 26. people finally got the memo and now we now we need to return so keep that ad revenue up above 20% and show us the product

show us what we're getting for that AI money and I think we're going to see I think we're going to see it before the end of the year Okay, so from meta to Malcolm Microsoft Because it's a stock that's done as Dan Ives said and the chart doesn't lie Hasn't done much I know there's concern that AI is killing software If any of these software companies seem to be able to fend that off it would be this one for obvious reasons and the partnerships in which they have. What's your outlook? Yeah, I heard Steve Kovac say two things earlier that I want to highlight for the viewers as it relates to Microsoft.

One of them was as it relates to Open AI, because this is the first time that we've heard, we will hear earnings from them that include guidance separate and apart now that they've restructured that relationship with Open AI. They both mutually agreed to see other people, so to speak. And so immediately after, in November, Microsoft announced that they had, committed, they have received $30 billion worth of commitments of spending from Anthropic, Open AI's direct competitor. They also agreed to invest $5 billion into Anthropic.

And so those are the sorts of things that I think will help to tell a bigger, broader story for Microsoft. A lot of the concern around this one happened to be, in that October sell-off, happened to be related to Open AI and questions about their ability to make good on their commitments. Separately from that, I think that a lot of the questions about this name disappear, if If Microsoft is able to report Azure growth, that's 40% or more year over year, all of a sudden the questions over enterprise adoption of co-pilot and everything else go out the window, and we recognize that right now the company is clearly focused on cloud credits and renting

out cloud space, and that is good business with great margins for this business, even if the margins are a little bit thinner because they're having to make those investments into the data centers to build out additional compute for new customers. All right, two minutes to go in the show. I mean, Julie, I think, said $39 billion was the number for Azure. Malcolm wants to see at least 40. What do you make of the points that he suggested? I think, look, great points, Malcolm.

Look, 39 to 40, that's sort of the number. Look, the biggest issue here is the view like that Google, Amazon, other hyperscalers. Mike, this is for Nadella to basically show what, growth's going to accelerate. We're not backing down. And don't just put us in that cam that the best days in the rear view mirror. You don't believe in any way they are. It feels like since you mentioned, you know, the Della, I mean, you mentioned, I could mention what's happening with Alphabet.

They feel like they've stolen some of the thunder from a lot of these other names. Is that true? I think 100% true. I mean, you go back a year ago, right? I mean, Alphabet, no one wanted to touch it. Now, massive demand that you're seeing on cloud, both in the consumer as well as in the enterprise, where Curian's done. But that's why Microsoft recognizes, like, this is a huge moment for them.

It's a huge moment for Big Tech in terms of the set where you've seen some white. knuckles on this big texture. Last in quick, Tesla. The Wall Street Journal suggesting the other day, Musk leaning back into politics, exactly the place that you don't want him to go. What do you mean? I mean, look, it's obviously a balancing act.

You don't want to see him dive into deep end of the pool. You need to see him in the good part on a positive with Trump, given autonomous. But no doubt, you need them focused on Tesla. This is the big earnings possible. All right to see you here in person. Thanks for being here, Dan Ives, of course. you as well, Steph and Malcolm. Thank you, as always, while the moment of truth is just moments away.

The bell rings, and that send us closer to these mega-cap earnings. I'll send it into overtime with Melissa and Mike.