Closing Bell - Data Center Bubble Trouble? 03/25/25

Episode Date: March 25, 2025

Alibaba’s Joe Tsai raising the red flag on data centers – sending several stocks lower today. We drill down on the details and the sectors most impacted. Plus, Apple announced its dates for WWDC. We discuss what investors need to be watching from that event. And, Saira Malik from Nuveen breaks down her Q2 playbook and the pockets of opportunity she is seeing in the market right now. 

All right, Kel, thanks so much. Welcome to Closing Bell. I'm Scott Wopner, live from Post9 here at the New York Stock Exchange. Here's how we look with 60 to go in regulation today. It has been a mixed day for much of the session. A rare tariff free news day, believe that. And this make or break hour begins with a big question about this market and what's been the most talked about trade of the past two years.

AI, of course, from the hyperscalers like Meta, Microsoft, Amazon, and Alphabet spending billions to Chip King NVIDIA reaping those rewards. The money chase soon moving to data centers and the companies that will power them. But now one well-known tech titan wondering whether history might be repeating itself or at least rhyming with a quite perilous period of the past. We do have several reports, reporters on the case. Georgia Bosa with the comments that sent several stocks lower today.

Christina Parts-Nevulos is watching the fallout in the chips and Leslie Picker following the big money chasing those data center dreams. Dee, we begin with you today. So Scott, the latest cold water and massive AI spending, it comes from Alibaba group chair, Joe Tsai. Over the weekend, he warned of a potential bubble forming in data center construction and questioned whether the pace

of the build out might outstrip demand. Now this touches on anxiety that has been building in the tech community since DeepSeq's breakthrough, showing that cutting edge models, they can be built far more efficiently and cheaply than anyone thought. DeepSeq and then showing that cutting-edge models, they can be built far more efficiently and cheaply than anyone thought. DeepSeq and then the many models that followed using a similar format also provided

more justification for a digestion phase, referring to a period where companies slow down massive infrastructure investment, take stock of performance and ROI before scaling further. But no one in the West wants to be associated with a slowdown. The AI race is seen as too fierce, too important. Microsoft CEO Satya Nadella, he actually floated a sentiment similar to size about a month ago

when asked on a podcast if he would spend hundreds of billions of dollars on compute to compete on the frontier. He said he was taking a more balanced approach because there will be, and I quote him, there will be overbilled. And he was happy to lease capacity to serve the next big model.

An analyst note followed that spooked the market, similar to today, suggesting Microsoft had canceled some of its data center leases. Ultimately though, that was played down by Microsoft executives. Scott, what we're seeing today in the market, reaction to size comments suggests that investors aren't convinced.

And we're gonna be on the lookout for more commentary around these big spending plans as models only come down in efficiency and price. It does seem though, you know, we're still trying to learn from the deep seek fallout and that the spending is going to continue for the time being. And we'll just figure it out sometime down the road, even with those somewhat cautionary comments

that you mentioned from Satya Nadella. Right, and there's always going to be players who are developing on the frontier like OpenAI, like Google with Gemini and Anthropic and you know Tesla with Grok, I'm sorry, XAI with Grok. They're going to be spending, they want to collect as many GPUs as possible because they want to push the boundaries, but there's a bifurcation happening right now in AI model building. You can do it cheaper. Does it go back to Jevons Paradox? The more you produce, the more that you're going to need.

That is a likely scenario. But it kind of touches on the anxiety that you may want to digest and maybe rethink those spending plans. I spoke to a few CEOs who thought we may not see that this year right away, but Next year and that would be significant too in terms of Nvidia in terms of the CapEx we're seeing from the mega caps All right, D. Thanks so much for that dear Drabosa speaking of Nvidia do have several chip names Moving lower today perhaps on these comments from Joe Psy Christina parts in Evelos obviously covers that for us and has this look across your

space today and there's a lot of red. Yeah, there's a lot of red. There was a lot of green yesterday so it could just be some profit taking. But really what the big question that Dee just talked about too is what happens if all that deployed capital really just ends up sitting idle in the coming years from now. So Nvidia really is, we know, AI chip tightened. It finds itself at the center of this high-stakes scenario, which is why we always have to bring it up.

But at last week's GTC conference, CEO Jensen Wong went into full reassurance mode. And his message, the four tech giants, Google, Microsoft, Meta, AWS, you can even throw Oracle in there, aren't cutting back in spending. In fact, they're heavily invested, which I took as maybe sounding a little bit more defensive,

something we haven't really seen from Nvidia, but it's intended to calm market jitters, you know, especially to today's headline from Alibaba. But Apple, another one, reportedly dropping a billion dollars on Nvidia's servers today, this according to a Loop Capital report. But if spending peaks, the impact cascades way beyond Nvidia. The potential market tremors would include Taiwan Semi, the world's number one chip manufacturer, Broadcom, the top custom chip market, and to a certain extent, I put in Marbella as well. You can see all of these lower right now. And then Micron, a critical memory provider here in the U.S. But geopolitically,

this could be more than just a technological trend. I really liked how Mizzou and Jordan Klein put it in his notes today. He frames it more as a strategic technological trend. I really liked how Mizzou, Jordan Klein's put it put it in his notes today. He frames it more as a strategic arms race. This and with China specifically putting out headlines like this constantly, just to demonstrate that the semiconductor industry is really a landscape where there's technological superiority and cost efficiency.

And really it's just an arms race as to who's going to be number one. And so when you see headlines like this coming out of China, it's a way for them to show, hey, we're doing it at a cheaper rate. We don't need to spend all that money. And in essence, it really hurts the U.S. providers in the long term. Christina, thanks for that from you. Christina Parton-Evalest.

Now to Leslie Picker for more on the big money chasing, as we said, those data center dreams. And there's a lot of private equity in that mix. Yes, big money and a lot of private equity, Scott. Private investments in data centers actually reached an all-time high last year. According to PitchBook Data, digital infrastructure funds struck $108 billion worth of deals, more than three times as much as they spent in the prior year in 2023. These investors see data centers as essentially the picks and shovels of the AI gold rush. We've heard that time and time again.

Rather than betting on individual AI native companies, they're paying up for the infrastructure projects with the goal of ultimately garnering premium rents and long-term leases. The biggest such deal last year was a consortium takeover of AirTrunk for $16 billion. Another group made a $9 billion-plus equity investment advantage data centers, and there were five more deals worth more than a billion dollars each last year. Blackstone Digital Bridge and Macquarie have been

longtime players in this space, and actually Blackstone CFO Michael Che was asked at a recent conference just a few weeks ago about whether the DeepSeq phenomenon changes the calculus for the firm. Che called data centers the, quote, mega trend of mega trends and says they expect the, quote, geometric growth to continue. He says there will be some shifting within data center footprints with the training component being more efficiently deployed, leading to more demand for inference compute. So kind of speaking to a bit about what Deirdre mentioned earlier. with the training component being more efficiently deployed, leading to more demand for inference compute, Scott. So, kind of speaking to a bit about what Deirdre mentioned earlier.

Yeah, absolutely. Leslie, thank you for your reporting there. With me now at Post9 is patient capital founder and CIO, Samantha McLemore. Welcome. It's nice to see you. Nice to see you, Scott. How are you thinking about all of this? I mean, do you take pause when someone like Josiah talks about a bubble? We've tried to call bubbles many times over the

years, hasn't always worked out. You always have to think carefully about those things. So I think one, what he said is it's the start of the beginning. So that sounds very early. I think the reporters covered it well and they covered that there's a lot of concern here. So I think that's good for keeping the stock expectations contained and reasonable and at the same time it's the mega trend of the mega trend. So we have a huge technological revolution combined with you know not modest but not really flying away stock expectations that makes us excited. Sometimes when the calls appear to be early we don't pay attention until it's too late.

And I'm reminded of, of course, Alan Greenspan in 1996, talking about irrational exuberance in tech. And of course, it was three and a half years later that we had the crash. That was obviously a moment in time, not suggesting that history is going to repeat itself, that it was going to perfectly rhyme With that period but the broader point is that this can take a long time

Yeah, manifest itself if it in fact is even a bubble Yes Usually the peak of bubbles is not characterized by massive concern and headlines every day on the news about Bubble bubble bubble so we may get there and I wouldn't be surprised if we end there I just I don't think we're there yet and neither do the CEOs spending this amount of money. Well that's for sure not yet speaking of you know you you own many of these stocks Amazon alphabet meta Nvidia what do you make of the way they've traded lately? Well I think they had a huge move they were the dominant performers last year so I think having a correction is normal natural we thought coming into the year we might see a broadening out as the economy sort of improved.

Now we'll see if that happens depending on how the economy shakes out. But I think it's not surprising to see the stocks pull back given the moves that they've had. Correction because of rotation? Or is the money just going to come right back in now that investors deem the multiples more palatable? I would think that they would remain the leaders of this market. I think if something happens that changes that, that would not be as constructive to the market,

but I think we've just had a normal natural correction. I think the leadership will remain the leadership, although I do think we'll have a broadening out and many other stocks can do well, like we saw late last year. You do, so even with these concerns about the economy and tariff headlines and all of that, you think that the broadening can happen?

I do. I think we just had a normal, natural correction. I think they're healthy. They never feel that way. They happen for legitimate, risky reasons, the tariff and the trade wars. Those are real risks. And I think if we continue in the environment we have now, that wouldn't be good.

But I think Donald Trump wants the markets to go up and he'll, you know, retrench. And we've already seen that. And I think the Fed, you know, will be cutting if they need to be cutting. Okay. Well, that raises a really interesting question. And I'm not sure there's a good answer to it yet. And I know it's being debated as to whether that so-called Trump put and even a Fed put exists at this point, or if both of those, as some would suggest, have both come at a lower price than originally thought.

Well, I think it's quite clear that the Trump put that everyone thought existed didn't exist at the level people thought it existed. So the market's been much weaker than people thought Trump would allow it to be. I still think, and you're starting to see comments out of his team, that they do care and they want a healthy market. And so they have backtracked on some of the tariffs.

Now, we'll see what happens next week. But I think they are still sensitive to overall market conditions. I don't get the sense that you're questioning the idea of a US exceptionalism trade. The one we came into this year all bulled up on. And then because of the back and forth and the way that some of this tariff policy has been rolled out, it's caused way more volatility than people expected. I'm not sure people had a 10% pullback on the S&P on their bingo card on January 20th. Well they should have because last year we didn't have a 10% pullback and they're pretty common.

The last one we had was 2023 so we came into the year saying listen we're likely to have one at some point this year who knows when that will be. I think the U.S. is in a great position, is still in a solid position. I think other global markets have done much worse, so it's not surprising to see them do better relatively. I think the US can still do well, and particularly from this point, with the US markets down and other markets up so much, I would be buyers of the US.

So the fact that, you know, let's say Europe underperformed for, you know, whatever time period you wanna say, three, five, even 10 years probably, that was then, and that doesn't mean that this move into those markets and the performance, the outperformance that they've had year to date has any chance of lasting. Because there seems to be debate on both sides,

even today, from the notes I've read from different firms on the street. Well, we are seeing constructive action in those economies and those governments and spending decisions that I think can help those markets. I think the U.S. should do quite well from here and I think investors unfortunately will chase whatever is doing well instead of adding to what's not doing well, which I think is the most sensible thing to do. Were you buying when the market was down 10%? We were. You were? We were adding, yes. In which areas?

We, you know, a lot of names got hit really. In which areas? We, you know, a lot of names got hit really hard and so we were adding, you know, a number of names. Norwegian Cruise Lines is a name that was down, you know, over 30%. I think it's very attractive. We think that stock can compound at the mid teens for the next decade and maybe 20% for the next five years. They have good growth profile. I think cruises are a relative value to land-based vacations. And it's a cheap stock. So when you look at those names, and you're right, I mean, they had sizable pullbacks.

You know, it was really Delta's warning that day. A lot of the travel stocks sold off hard. Some of the retailers have not performed well, and there seems to be a lot of concern about the consumer. Yes. Where are you on that? Well, I think this level of uncertainty that we have in the market is so high.

And so you see CEOs not making capex decisions, consumers pausing travel decisions. Again, I don't think we don't wanna see that kind of environment sustained. That would be destructive for the economy and the market. The market can handle it for a short time. But I think Delta, you know, people have been fearful about demand rolling over and travel

for, you know, two years, ever since it recovered. And so it's still growing at Delta. Revenues are still up three to 4% in the quarter, but they were supposed to be up six to seven. So we are seeing lower growth than expected. Growth scare, not recession. Correct. That's the bottom line? Yes. And if the economy does get worse, how do you feel the Fed is going to react? And is that one of the reasons why you remain bullish? The so-called Fed put. We talked about the

Trump put. Yes. But what's your take on the Fed? Well, I think that's another, I think you just saw at the recent meeting that their concerns about economic growth grew a lot from the January meeting when they had no concerns. And so I think they will be very sensitive to employment, which so far has hung in there relatively well and very sensitive to any concerns on the economy and economic growth. So that seems to be, you know, certainly one of the views that they are willing to tolerate a little bit hotter inflation for a little bit longer, but they're not willing to tolerate a deterioration in the economy ex the labor market or from the labor market and that's why people believe that this put

Does exist well, especially with inflation at the current levels of call it, you know, three percent. We're not at nine percent They wouldn't tolerate that percent but at three percent again, if unemployment starts increasing, I think their tendency will be to cut more quickly. What do you make of some of the more defensive areas of the market that had done well, even leading into the correction? Staples, healthcare, just things that are normally a little more defensive that don't get you all jazzed up about the overall performance of the market. What do you think about those areas?

Coming into this period, they looked relatively quite cheap, but that has completely reversed in the correction because those names have done so much better. So again, we don't have much exposure there. I think over the long term, it's hard to see how you make much money in a lot of those names. How about energy? Does that get your attention with the performance that it's had? It's up 9% year to date?

We were adding to energy last year. Everyone was widely bearish about the prospects for crude. If you look at, you know, so again, no one can predict crude prices, but people, that doesn't stop them from trying. So what you do know is we can look at the value of those businesses in a normalized crude environment, so call it $65 a barrel.

And some of the stocks, the ones we own, we think look quite cheap. And some of the equipment companies, I think look cheap as well. I guess I'd finally ask you, does it feel to you like the corrective period in the market's over? It does feel like that, although I would say

let's see what happens next week. It could go a little lower. I actually think market weakness is a good thing if it pushes Trump to be, you know, less harsh with the tariff policy, which so far it has, but it took longer. So ultimately I don't want to see big tariffs and trade wars. I mean, we always sort of talk about, you know, buy the room or sell the news.

I'm wondering if there's the potential of a reversal, a flip the script, so to speak, this time around. I absolutely think so. I think yesterday we saw some headlines that the April 2nd tariffs are not going to be as extreme and the market had a huge rally. So I think that shows you what's priced in in here. Well, we do have a rare quiet day on the tariff front. We'll see how that transpires. Samantha, thanks for being here. Thank you for having me. Samantha McLemore, patient capital,

the founder of the CIO. We're just getting started here. Up next, Apple announcing the dates for its worldwide developers conference. We'll break down what investors should expect from that big event. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. Apple announcing within the last couple of hours the dates for its Worldwide

Developers Conference. Steve Kovac here with more on that. And I can't wait for that. It was going to be a year ago that we sat together and the stock just took off after that. Not so much anymore. Yeah, and I got a chart for you what it's done since then actually. But first WWDC starting that's June 9th. That's when we're're gonna have that big keynote and get a bunch of announcements. Now every year, Scott, as you know, at this conference, that's when Apple reveals the new software features for the iPhone and all its other platforms,

but really the theme going into this, Scott, is it's gonna be their chance to turn around the AI narrative after they fail to deliver that big Siri AI update. Plus, there have been some other underwhelming AI features that did launch and just really failed to keep up with what we're seeing from all these other AI companies like ChatGBT and so forth.

And it's also a chance here for Apple to earn their trust back. What can they actually demo that they can say is actually going to ship on time? What we saw last year, even though it did ship, some of it, the big part did not ship. So there's an increased amount of skepticism here. And also the last two WWDCs,

big pressure to deliver something really cool and great, like the Apple Vision Pro in 2023, and Apple Intelligence last year. But neither of those products have broken through, and they're really in their infancy here. So beyond AI though, let's talk about what else we're expecting here. Bloomberg reported the other day that all the software for iPhone and iPad and all their other major platforms are going to get a big redesign.

It's biggest redesign since the early 2010s. But look, that really doesn't matter to investors. Just because the software looks cool and neat doesn't really matter because you need to pay attention to the features that sell iPhones, and we still think that's going to be Apple Intelligence. At least that's the narrative that the people, the bulls on the street think right now, Scott.

It really represents the chart that you showed from last year yeah WWDC and until now what was very much a benefit of the doubt stock that became more recently a show me stock benefit of the doubt the ramp from that June date and then the show me much more recently and we can put the chart up again and you'll see exactly what I'm talking about, Steve. Yeah, it's up 13% from that June of last year. And keep in mind going into that,

like you said, the benefit of the doubt, the stock was down significantly way behind its Mag-7 peers going into that event. And they did get the benefit of the doubt and they failed to largely prove that they could deliver on what they promised here. So there's just gonna be this increased barrier of skepticism, let's call it,

going into everything that they announce. And unless we can see it and feel it and touch it and the developers there, unless they can actually play it and start working with their apps and using this new artificial intelligence system, it's gonna just cede more ground to these other companies that are doing more interesting stuff.

Keep in mind, we already got dates for Google and Microsoft's developers conferences. Those are gonna happen in May. They're gonna get a little leg up on Apple to do their own take on consumer artificial intelligence products. And another thing I kinda wanna hit though, outside of the software and the AI stuff,

I've been thinking about this a lot the last day or so that we've been reporting on this Scott, is the hardware thing. We gotta see more interesting hardware of Apple too. The iPhone business is still behind, it's still slagging in China, like I've been talking about all day. And there's this idea now that like,

what can they do on the hardware front that gets people excited like they used to be? There's these rumors of a new super thin iPhone maybe coming out later this year. Perhaps that changes the conversation, but it's not just about the software, it's also about the hardware, I think. Yeah, good points you make. We'll be side by side again out there.

I'm looking forward to that. Thank you very much. Steve Kovac, let's bring in Holly Mazoka now of Bartlett Wealth Management and Ayako Yoshioka of the Wealth Enhancement Group for more on this and the markets in general. Holly, nice to have you here. Do you own Apple?

What do you think of it? As we said, always got the benefit of the doubt, or at least most of the time. Right now it's like, okay, show me what you got. I think that's exactly where we are right now. We have been fans of Apple over the long term. As we think about putting new money to work, as a lot of these stocks have corrected, 15% plus, we are more mindful of where do we go from here in this story?

And I think that's the big question on investors' minds. Apple has always favored this idea of the asset light model and depended on others to be the forward-facing, to be the explorers. Think about the way that they work in search, for instance, with Google leading the way in search, and they're quite dependent on that. And then Apple perfects the consumer experience.

And I don't know about your experience with Siri, but my personal consumer experience is not yet perfected. Well, it's interesting that that's the way you characterize it because Apple is really not known for being first in much of any of the things that they do, but they're usually known at being the best in everything that they do. And now we're questioning that. I think one of the things is that with Apple, you have such a loyal customer base. But as an investor, we really are looking for that acceleration in the upgrade cycle.

I think just given the overall macroeconomic backdrop, consumers have less disposable income and are less likely to upgrade. And so anything that would accelerate that upgrade cycle is what investors want to see. I mean, Holly, you knew at some point that investors weren't going to tolerate these stocks going down that much, right?

At some point, you would have buyers step in. Did we reach the point where multiples corrected enough that it was just time to say enough is enough? I think that's where we are right now, where we have seen this nice correction and we're starting to leg into it The question for investors from here will be will we get enough policy certainty to make that next big investment? So instead of like we saw on the stock charts with Apple just bumping along will we actually get something exciting?

I think Aya brings up a great point about that product cycle, and Apple is very dependent on what's coming next. Also this idea of what is happening in the hardware. You suddenly have really interesting options if you are a Chinese consumer that you didn't have several years ago. You know, Aya, Holly just mentioned policy certainty, and I'm wondering how you think about that in the context of this market. It's been anything but to be frank and and that's why you've had the market react to the twists and turns at every move that it's done.

At some point do you think we're gonna get a little more certainty? As I said yesterday we get past all of this stuff and then we get to the good stuff. And by the good stuff, I mean the stuff that people were talking about coming into the year. Deregulation, tax cuts, and all of those things and deals, by the way, that were going to be a stimulant to the market. Yeah, you have to take your bad medicine first, I guess. However, you know, I think that we'll see if we get this sort of all clearing event next week on April 2nd- but then I think that we're going to still see some muddling along in the markets as we digest. You know guidance from earning season sort of shortly thereafter so I think it's going to continue for a little bit long in terms of the overall market volatility. How do you see that? Do you actually think we're going to get some level of certainty to calm

the market? We're calm today. We haven't gotten anything. Right. Where we see government policy right now is it's a high wire act. There's a lot at stake. And investors were expecting a very favorable business backdrop coming into the year. It was quite supportive. That's why we had valuations where they were. And what we're hearing now is even the Federal Reserve in the recent commentary from Chairman Powell is saying, we're in this balancing act between slowing growth and potential rising inflation,

and we have to figure out what this looks like going forward. I think the real question from here comes down to this idea, will the sentiment indicators that we're hearing in the sentiment surveys play out in real life as CEOs start to slow down some of those major purchases? Are you still you know banking on the fact that the Fed's gonna cut rates a couple of times this year and that's gonna be the thing at the end of the day that puts this market forward? We never want to bank on a Fed put. We really believe in

preparation over believing that the market is just going to slide all the way through. So I think for us, it's about making sure that you are well diversified and that diversification is a form of defensiveness. All right. Thanks for being here, Holly. Thank you. I will talk to you soon.

Thank you as well. I said it was all quiet today. Maybe I jinxed it. Eamon Javers joins us now from Washington with some breaking news. What are we learning here, Eamon? Well, Scott, President Trump just wrapped up a meeting with his ambassadors in the cabinet room at the White House, but in that meeting he took some questions about this scandal that's erupted over the past 24 hours about his national security team accidentally including

a reporter on a text chain in which they discussed attacks in Yemen. The president didn't seem very concerned about that. He said, normally you'd want to have a conversation like that in the situation room or secure facility, but life doesn't always work that way. This is one of the things that can happen with technology. He said his administration is going to look into how this situation happened. But his national security adviser, Mike Walz, who was in the room for this meeting, Trump

was signaling support for Walz, saying that he doesn't need to apologize. He's a good man. He's doing a good job. He's probably not going to use the signal messaging service in the future. And he said that they're going to try to get to the bottom of how this happened. But the president very much sending a signal of unity among his national security aides and saying this is a story that's being drummed up by the media to undermine his administration, which he said has had a very successful first two months.

Back over to you. Sure. I mean, I guess it all depends on, Eamon, what you think the definition of classified is at this point. Yeah. You know, some administration intelligence officials were testifying on the Hill today think the definition of classified is at this point? Yeah, some administration intelligence officials were testifying on the Hill today, saying there was no classified information in this text

chain at all, and then sort of narrowing that later in the testimony, saying, well, actually, there was no intelligence classified information, sort of leaving open the question about whether there was military classified information. The Atlantic article suggested that there were names of particular people who were being targeted, targets themselves, weapons systems,

and times-forth strikes all included in this text chain. All of that would seem to be highly sensitive. The question is whether the DOD and the chairman of defense is able to declassify that information as he sends it. Is he, Pete Hedges, the secretary of defense, is he able to declassify it as the unilateral declassifying authority for that just by sending a text? So the real questions here about what specifically was transmitted and what specifically was classified, the administration by saying there was nothing classified here, is sort of opening themselves up now for the Atlantic to then release the information and

say well if it's not classified we're going to put this out publicly because that publication clearly does have the text chain. Yeah. Eamon thanks for the latest there. You bet. Eamon Javer is up next. Sarah Malek, she's back breaking down Nu Veen's Q2 Playbook, the key investment theme she's watching right now.

She'll tell you about that first next. All right, we're back. Stocks on track for their first negative quarter since 2023, but our next guest still finding pockets of opportunity in the months ahead. New Veen's head of equities and fixed income, Sarah Malik, is out today with her new Q2 playbook, sharing it with all of you first. Sarah, thank you for being here, welcome. Good to see you, Scott.

All right, let's lay it out for people. I mean, what's your best idea here for the next quarter, now that we're facing all this uncertainty and heightened volatility in stocks? I think first of all, from a macro point of view, the second quarter is going to have two themes, and that's policy uncertainty and questions over the rate of the economic slowdown.

We're already seeing that since the rebound from correction territory a couple of weeks ago, where a little bit of optimism has been injected back into the markets, because investors expect watered down tariffs, and that famous word came back transitory in terms of the inflation impact from those tariffs but the second

side of that question is what's going on with the economy the consumer has been the driver of this economy and we just saw today consumer confidence coming in at a four year low so I think the economy continues to slow so we're still

interested in defensive categories of the markets like infrastructure as more and more as we shift to renewable energy continued to continue to use traditional energy and build out more in the United States infrastructure

and AI data centers I think infrastructure as a sector is going to be very strong another area that we like our municipal bonds the fundamentals of states are very strong we think community bonds also are producing very strong returns right now and that's another area of fixed income that we like as a

global investment committee. You are though concerned, are you not, about the trajectory of the economy? That you think that the more you keep talking about the weakness in the economy and the more that we talk about consumers feeling uncertain and unsettled and maybe spending less, it becomes a self-fulfilling prophecy. Yeah, I think the rate of the slowdown of the economy going forward is going to be the key question. The economy has been driven by the consumer strength and employment markets. First of all, about half of the payrolls produced since 2019 have come from government jobs.

So the impact of DOGE is going to be important. And then second, consumer spending, retail sales, consumer confidence have all been weak lately. I will offset that by saying that consumers do tend to be grumpy spenders. So consumer sentiment is not always a sign of what consumers will do with their pocketbooks going forward. But the economy is definitely slowing. And if we continue to see this back and forth and lack of clarity around tariffs, I think that will cause the economy to hit an air pocket.

But remember, we still do have tax cuts and deregulation potentially in front of us. So there is upside here going forward potentially. Yeah, but that's the great unknown, right? I mean, we came into the year

thinking that we were all fixated on that. And now we're talking about tariffs every day. And now we're talking about April 2nd. And now we're talking about April 2nd. And then after April 2nd, who knows what happens from a tariff perspective from there. So how does that impact the way we should think?

We definitely came into this year on three themes, taxes, tariffs, and deregulation. And it does seem to be we're getting them in that order. I think you're seeing this optimism in the markets over the last week or so, because the clarity around tariffs and where they may be targeted is making the markets a little more positive from where they were a few weeks ago. I think if tariff implementation can be clarified to the economy and to investors, that would

be a positive. The question marks though are who's going to eat the tariffs? Is it going to be the producers and therefore it will hit their margins and potentially their earnings or will it be passed on to consumers which therefore may have less money to spend and it may hit consumer demand but those are all the question

marks out there the good news though is how said last week he's willing to look through the inflation that may come due to tariffs and continue to cut rates so a bit of a balance here I think the markets stay in somewhat of a trading range

until we get past April 2nd but if the economy can decelerate it not too fast of a rate, then I think we can make it through this. And those are some of the areas that we like, like infrastructure, municipal bonds, and small caps could have a catch up trade in the U.S. Well, see, I was going to go there next because I'm trying to square how you could have concerns about the economy decelerating further, maybe not going into a recession, but nonetheless, any further deceleration in the economy would theoretically put pressure on small caps, no? Well, so first of all, is valuations for small caps.

And I always say valuations are not a reason for a segment to recover, because you do need a catalyst there. The potential catalysts for small caps would be tax cuts and deregulations and also the Fed cutting rates. That would be what would cost small caps to rally. And they have been a laggard this year, but only by about three to 400 basis points behind US large caps. So they've not been a terrible asset class, but they still are trading at a significant discount

to large caps. And I think as we become more domestically oriented due to tariffs and tax cuts potentially help the consumer you could get that catch-up trade for small caps. Are munis the best way that you would play credit right now? Munis and senior loans so somewhat defensive in terms of our fixed income positioning but returns in fixed income are still quite attractive for investors so municipal bonds because of their, the states are very strong. And then senior loans, in fixed income, traditionally, we like credit over duration, quality senior loans is the other area that we prefer. Sarah, thanks so much. We'll talk to you soon. Sarah Mallick from Nudeen. All right. Up next, we track the biggest movers into this close. Christina Partsenevales is

standing by with that. Christina? Well, Scott, we track the biggest movers into this close. Christina Partsenevalos is standing by with that. Christina. Well, Scott, we have a political media platform entering the crypto world while an autonomous driving firm gets a major boost from a global automaker. Those stock movers right after this short break. All right, 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. Plus an activist push for lift dear to both with the details for us there and see me Modi

on bullish calls today on two cyber stocks will follow that. Michael we begin with you all quiet on the Western front of the White House for the most part regarding tariffs anyway. And that's why the market's been so calm. Yeah, allowing the market to kind of digest yesterday's rally, really a 4 or 5 percent rally off the lows in a pretty benign way. Nothing going on today has really undercut the credibility of that recovery attempt, though I do think at some point you migrate from, well, we're rallying because we priced

in something too negative and things aren't as bad as implied, and you have to get something affirmative to come along at some point to get us back anywhere close to the old highs. There also is, and we keep talking about the momentum effect, a very, very dramatic unwind of the unwind going up. So essentially this big rally in all of the once beaten up crowded momentum stocks.

And so you wonder how much that can carry. I'm looking at semis that had a little bit of a sloppy day, aren't able to get back up into the range they were in from November into March. So you have to keep an eye on these things that just aren't confirming. But that being said, like I said, we built up a little bit of a cushion off those lows. Utilities the worst today. Not surprising given the reaction to what Joe Tsai said about a possible bubble related to data center.

You look in utilities for the... Well, semis and utilities. And I've always been suspect of any of the bid in utilities that's mostly related to AI power needs. That stuff is sort of so far down the road, it's just not clear it's gonna make the bottom lines of a lot of the utilities making up the index. But does that make you more interested

in the question of whether it in fact was a bubble? Because if you think a lot of the run-up was based on that story, a story alone doesn't tell you where the fundamentals lie. I mean, strictly speaking, one reason I would say it's not demonstrably a bubble is these companies are like cutting checks for these builds. In other words, it's not some kind of leverage play where it seems like there's systemic

risk that's really inflated to a point where it's going to take a lot of other stuff down with it. It could just be, you know, we're building really valuable infrastructure and the people paying the bills aren't getting a good payback for it. That to me isn't some kind of dangerous bubble at least. Okay. Dee, tell us about Lyft and its activists. So Source tells us that Engine Capital has built a stake in Lyft of around $50 million, and it's pushing for a review.

Now Lyft, when it went public nearly exactly five years ago, it closed its first session with a more than $20 billion market cap. Today, it is sitting at around $5.3 billion, so a lot of value lost in that time. While larger rival, Uber, has gone the complete opposite direction, it now has a market cap of more than $150 billion.

It became profitable, made a big bet on delivery to diversify, and it shed some of its more capital-intensive units. Lyft, on the other hand, has remained a pure-play ride play ride sharing company. David Risher took over from the founders in April 2023. Stock hasn't done a whole lesson since then, but he has improved profitability, recouped some market share, and signed AV partnerships.

But Scott, given that huge delta between Uber and Lyft, perhaps not surprising that an activist investor wants to come in and push for more change. I will say though, Lyft went public with a dual-share structure, and I believe the co-founders still have voting rights. It'll be interesting to see how this plays out. Yeah, interesting. We'll follow that. Dee, thanks so much.

Deirdre Bosa with the update there to SEMA on these bullish calls on cyber. One pocket of strength within tech, Scott, are these cybersecurity names. Look at Cloudflare, which makes the cloud security software. It's on pace for its best day since early February, after Bank of America double upgraded the stock to buy. Analysts there placing a high probability in Cloudflare's artificial intelligence as a service product, which they say will be the method of choice for enterprises and big business. Shares are up about 2.6%. And then there's CrowdStrike.

BTIG, out with a bullish note on the stock, their channel check suggests that customers have largely moved on from CrowdStrike's defective software update last July and argue that sales estimates are therefore too conservative. They're raising their price target on CrowdStrike. Shares took 431, it's currently trading at $384. And while we're on this cybersecurity topic, just take a look at Paula Alter Networks,

also riding higher ahead of its Ignite conference tomorrow. Scott, so some names to watch. Thank you very much, Seema Modi. You know, Mike, one of the reasons why the market stabilized and we've rallied back is because a lot of the momentum stocks have stabilized. And like the CrowdStrike's of the world that sold off hard, and there are a number in there. Even some of the power players that we talked about have stabilized, and that trend continues to some degree.

In fact, it's accelerated in the last few days. If you just look at those areas of the market that really got purged, and so this is why it's mostly been a positioning whipsaw. Those stocks really always had the fundamental support. It was just a matter of how extended they got and based on those fundamentals. And it's in every sector.

We should always point out, you know, some of the real marquee names in that basket would have been like Eli Lilly. Oh, JP Morgan. And JP Morgan and Costco and Walmart. We talk about all of that. So that is coming back. And I think that's the reason I wonder

if we're gonna need to constantly monitor just how sensitive the market is to the idea that the confidence crisis we're in is going to bleed into something real in terms of numbers. Bond yields were up pre-market today and then you got weak Philly Fed, weak consumer confidence and they backed off again. They're in a completely acceptable range. It's not like the moves matter that much, but it just sort of shows you the direction of concern within the market based on all that. April 2nd creeping closer. Yeah. It's always gonna be in the back of our minds

here. PCE Friday April 2nd so you have this sense out there that we're gonna have a focal you know an effort to kind of concentrate our bets into that period of time. Volatility index did bleed lower again, so we're just around 17 right now. Not that far above what we consider the normal range, around 15. Good to see you, see you tomorrow. Thanks, Antoli.

The majors are red, I'm sorry, the majors are green. I was looking at the ruffle, which is red again. Down about two thirds of one percent. A little bit of pause in the bell, but we figured it out. I'll see you tomorrow.