Closing Bell - Markets Pause as AI Leaders Cool and Big Tech Faces Its Next Test 7/10/26

Episode Date: July 10, 2026

Our Kristina Partsinevelos examines SK Hynix's latest developments and what it means for the memory trade. Beeneet Kothari of Tekne Capital Management explains why the AI infrastructure story remains intact and where he sees opportunity across semiconductors. Steven Wieting of Citi Wealth steps back to assess the broader market, the economy, bond yields and currencies and explains how investors should position as macro forces evolve. Laura Martin of Needham discusses Apple, Reddit and Meta and where she sees the best opportunities across big tech, plus looks ahead to Netflix earnings. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Time for the closing bell market zone. Mike Santoli and Ned Davis researchers and Clissold here to break down these crucial moments of the trading day. Oliver Renick standing by live at the CBO Global Markets in Chicago today. And McKeel looking at the huge move today and shares in circle. Michael, begin with you. Give me your thoughts, please. Yeah, I mean, just on a one-day basis, clearly it's this low-volume levitation, the kind of thing that makes it very difficult to fight an upward trend on a Friday in July,

when the macro is quiet, which is what we're. we have right here. You know, Monday, it's basically two months since we started digesting and going sideways in the S&P 500. Over that period of time, I've been flagging some of the potential kind of dangerous rhythms out there, right? It was like, if there's going to be a stampede out of semis, are they going to trample other sectors? Is it going to cause some kind of a volatility spike? But it hasn't happened. So you have to give credit to, we got through this, at least to this point, the easy way. And maybe the bears missed a little bit of a window. I don't think we've taking care of some things like high equity exposures and the possibility that we're kind of setting

the groundwork for some kind of a dislocation down the row with very low correlations and all the rest. But right now you have to respect the market's action going into earnings season, yields remaining tame, oil still tethered. So you've got to get a reach for something to look at to worry about with valuations having actually come in a little bit. How do you take it on in about five minutes? Well, of course, we're going to talk a bit about S.K. Heinex, as we have to, and actually have an investment manager who told us a couple of months ago that the AI trade was moving to Asia. That's where to look for the food chain plays. We're going to get an update on that view. Oh, good, nice and timely. Appreciate that. Good weekend to you. Mike, thanks. Have a great show. Oliver, it's Cibo. What do you see there? Speaking of earnings, looking ahead to next week, Scott, Netflix is in a tough spot with the stock down 20% this year and hovering near $70, a key level that served as a pivot point for sell-offs and rallies, including where the stock was when it ended its pursuit of Warner Brothers discovery.

Options traders think the report will continue Netflix's history of big swings after earnings, averaging about 7.5% over the past year. More than twice as many calls traded versus puts today with about three times as many calls bought versus puts and three quarters of the dollar amount traded in calls. The most popular contract that captures next week's report is the 80 strike call expiring Friday. But be warned, plenty of traders are holding on to 70 strike puts with later expiryes so it's likely to be a battle, Scott. All right, good stuff, Oliver. Thank you. Tenaia, tell us more about this circle move. Yeah, the highs in the rear view now, Scott. but Cher is still ending with a gain here after the company said it received approval from the OCC

to operate as a national trust bank. So this let Circle directly manage the reserves backing its USDC stablecoin versus having to rely on outside custodians. It's also a requirement, Scott, of the Genius Act, that's the Stablecoin law that passed last year, for giant stablecoin issuers like Circle to obtain an OCC charter. Now, since that law passed, banks and traditional financial firms, of course, have been maneuvering into the Stablecoin space. Many hoping. to issue their own digital dollars and capture payment flows instead of relying on outside parties like Circle and its U.S.DC. Just today, for example, the global payments giant Swift announced a consortium with 17 major banks entering the stable coin race together. So institutional custody fees

as potentially added revenue for Circle could be a plus, but of course there is still a big competitive challenge for the company, and that may be why we are so far from the highs. Scott? All right, good stuff today. I appreciate that very much. Thank you. That's today. McKeel. Ed, you sound a little bit cautious in your notes here, only maintaining a modest overweight to stocks versus bonds and cash. Why? Well, I think we've had a huge run, and over the last couple of months, we've consolidated that going into the next few months. We want to surprise that consolidation continues maybe a little bit of a bigger pullback, but I do want to say that this is within the context of an ongoing bull market. In terms of what some of those

catalyst could be, you know, the expectations coming to this earning season are as high as they've ever been. You can look at earnings and vision for the last three months on a market cap weighted basis. They've never been higher. We have a Fed who is trying to guide towards a rate hike as well. So the macro is getting a little bit trickier here. Again, I don't want to oversell the bearish point of view, but some more consolidation can be expected. Yeah, but you suggest that overbought conditions in some mega cap tech stocks, exactly. That sounds like so a few months ago, not now. Well, if you look at said last, at a three-month basis, the tech sector is still two standard deviations overbought.

So we started that process of reversion an over-bought condition. I don't think we're quite through all of that. Now, what is a positive is that the rest of the markets held up pretty well. 75% of sub-industries are in uptrends. That's not the kind of thing that happens at a bull market peak. It's the kind of action that really is more aligned with a consolidation and maybe additional pullback rather than a bull market peak. The other point of contention I suppose I would have is that you're expecting the Warsh-led Fed to actually hike rates. Well, yeah, we're thinking one hike that that could be a signal to the market that they're serious about fighting inflation,

but probably not enough to break the back of the economy with the labor market, which is okay. solid but softening some, and that kind of buys worse some time until all these working groups have a chance to come back with their findings. And look, when you get these kind of one-and-done rate heights, the market does tend to have a modest pullback, but if it's just one or two, a year later, the market tends to be higher, S&Ps up on average over 11%. We'll see you soon. Those for us.

Bells are rigging us out. Russell's red, everything else green. We'll take that into the weekend. I'll see on the other side. The bells bringing an end to the trading day at the NYSC Vegas shares ETFs ringing the bell and at the NASDAQ Apogee Acquisition, closing out the trading week. Welcome to closing bell overtime live from Studio B at the NASDAQ market site. I'm Mike Santoli.

Melissa Lee is off today. Stocks mostly higher on the day. The Dow up about 150. points. Small gains for both the S&P 500 and the NASDAQ, the Russell 2000 losing about half a percent. For the week, it was a split decision. The Dow and Russell both lower, but the broader large cap indexes with more tech exposure posting gains. Invidia, getting back above the $5 trillion market cap level today, but Apple has been closing that gap recently at stock trading near its all-time high despite concerns about China. We're going to have more on Apple coming up.

And the big earnings report, we're watching for next week. Netflix, as the company may be planning a major strategic change, that is coming up as well. First, though, the big story of the day in the markets, the U.S. listing of South Korean chip giant S.K. Hanix. The stock offering price at $149, open at $170, closed right near there. For more on this debut. Let's bring in Christina. Parts Neville has been watching it all day. Christina. Yeah, it shares close at roughly like 169, and that's a 17% premium to wear the The same stock actually closed in Seoul, South Korea early this morning. And so American investors are essentially paying up for the purest play on high bandwidth memory used for AI chips. And of course, InViDiTimes reports high bandwidth memory prices could more than double in 2027.

And SKH group chairman, Che told me just this morning the shortage isn't easy. Listen to it. The demand is enormous exponentially. So I don't really see that there were any shrink sign of. or HBM. So all my partner wants more. And more demand could be on the way. The Commerce Department today loosen export controls on the UAE, which could speed up chip sales for Nvidia, AMD, Cerebrus, and Qualcomm so helped in mid-afternoon.

That strength also goes beyond chips, too. So there's a lot of news this week. Optical names moved higher as investors really size up the CAPEX implications for meta. Neo-clouds like Corwe, stayed well bit up on the idea that Zuckerberg may end up more customer than competitor, add it all up. And I know you talk about this a lot. Momentum is essentially back this week. Investors are definitely rotating more aggressively into these recent AI winners. Definitely has firmed up for sure. Momentum has. Now, you point out that Micron actually was slightly on the downside, did not participate. Barely. Barely, but it's a couple hundred bucks below its high. And I just think one of the questions with this offering is, the scarcity story is so

well known. I mean, as a fundamental case for this sector, and whether it was just going to give another way outside of Micron and others to play it, and therefore you didn't have to own as much of Micron. And so to your point, yes, Micron was used as a source of funding, as was other chips. And you can even say the Mag 7 over the last week and a half, which is why we saw so much volatility. There's no doubt. It seems to be consensus that the money had to come from somewhere.

It wasn't net new. You even saw ADRs in Europe for SK Hynix fall lower. Earlier in the week, we were talking about a 20% drop from the 52-week high for SK Hynix and some of these memory players, you know, bare market technical terms. So there's that funding's coming from there. How long does it last, especially when you have leverage coming into the market on Tuesday with the option? Sure. And I know previously I was quoting some, the inclusion from passive investing.

Yeah. But now just looking at just talking to the listing guys here and stuff like that, you need to have a minimum market cap to enter the NASDAQ 100. And so far, S.K. Hynix is definitely not there. They rebalance in December. It needs to be roughly 70 billion. million dollars. So S.K. Hynix would have to get there to be part of the NDX. And then for the SOX. The ADR. Tronch has to be 70 billion. Yes. Oh, no, no, no. Obviously. The whole market market caps like a trillion. Good point. They hit it with the South Korean stuff down just here in the United States.

Because people are saying, that's going to be so much more passive money coming in. Right. But not necessarily the case. Same thing with SOX. That's September, 2027. SpaceX, you know, reminds me in the first day action of SpaceX, which was considered to be almost an optimum scenario, right? You kind of had, The stock traded higher than the offer price pretty solidly in an orderly way, kind of closed firm and all the rest, just as we saw today was SK Heinex. Now, you did get a bit further spurt higher in SpaceX, and then it came in. So, you know, nothing says it's going to follow that pattern, but it's interesting. And then cerebrus, same pattern, same exact pattern. I think it was from Oppenheimer in a note today saying they didn't double check as the close because I was here on set.

But $1 trillion market cap lost for SpaceX just since it's high over the last month. That's a such a dramatic amount of money. And then Cerebus, I'm not sure the exact amount, too, but it seems like money will flow in. And there were quite a bit of retail traders, too, getting into this in terms of number of orders. And it immediately starts to seep out. Or perhaps the volatility scares people, too. You just have so much pent-up demand, ready to go, and then it gets kind of satisfied pretty quickly in the first few days. And then it's got a trade on its own.

We'll see. We just showed SpaceX closing near 145. Christina, thank you. Thank you. All right. So how should you play S.K. Heinex's debut and the massive demand for memory, if at all. Joining us now is Beneath Kotari. He's CEO and principal portfolio manager at Techni Capital Management. Beneath, great to see you. I recall,

you know, we spoke not that long ago, and you said the AI trades kind of moving to Asia. And the hardware food chain there was something that interested you. How does SKHonix fit in? And how are you thinking about the space now? Well, I'm not sure today changes very much fundamentally. It's trading at a premium to the local. That premium is roughly the same premium that TSM, the ADR, trades at its local. And, you know, when you take a step back on what's happened with memory, you've got to remember that the $300 billion of incremental profits that DRAM companies are making this year versus the last year, the vast majority of that, potentially 90% of that has come from conventional memory,

not the advanced HBM stuff that goes into the AI server. So a few years ago, these companies made all of their money on HBM, and they were probably losing money on conventional memory. That narrative has now flicked. So I think it's tricky, and our view is that there are probably other companies, actually within the SK group that are now better investments, such as SKC, which is one that we own. Interesting. Yeah. So as a reminder to folks, it's kind of this umbrella sort of holding company

structured. There's other subsidiary areas. More broadly, I mean, do you feel as if we're kind of rolling into another phase of this? There's been so much fixation on particular bottlenecks in hardware and optical networking, wherever it might be. Where does all that stand after we've really gotten a little bit of a gut check, at least, in the core semi-group? I think, you know, In this last quarter that was reported, Samsung made more money than NVIDIA, which is kind of an alarming concept when you think about a commodity company that generated more profits than probably the most advanced semi-system maker that we've ever had in NVIDIA.

We think the future bottleneck, if not the current bottom link, is less in memory and more in packaging. In fact, the $30 billion or so that S.K. Heinix has raised, the majority of that is going to go into packaging plants. So there's a number of packaging companies, particularly advanced packaging companies all across Asia. We happen to like one called Tang Fu. There's several others, China and Asia X-China, that's where the bottleneck is. And I think that's what you want to own over the next several years.

Given that there are these tailwinds for so many, I guess, different layers of the hardware side, is it correct to view the spenders, the hypers, as essentially being taxed? In other words, that they're the ones that are funding all this, their outcomes are uncertain, or is that idea gotten overplayed? I think it's reasonable. What these companies haven't proven without a shadow of doubt is that the returns will come in. And as those returns come in, which will happen over the next three years, this will normalize. But you've got to remember one thing, that the hypercalists.

scalers are not only the only companies that could have spent this amount of capital, but they also have borrowing capacity, right? Micron, S.K. Heinek, Samsung, two, three years ago, could have never really borrowed the amount of capital that they needed to make these investments, but the Googles and the Facebooks can borrow, and they are borrowing. So it's not just that they've got the cash flow, but they also have balance sheet capacity. We're utilizing all of it. We're going to have this massive buildout. The vast majority of that buildout happens in Asia. Very little happens in the, the U.S. Obviously, this administration is trying to change that, but it's going to take time.

And so our view has just been the dollars are getting coming out of our American hyperscalers. They're getting raised out of the American capital markets, and they're largely getting deployed across Asia. And that's sort of a big investment opportunity. So what is the next thing to be on the lookout for in terms of, you know, these companies now so flush that the market's going to sniff out capacity additions or some kind of a plateau? of their growth rates and then they're going to be in the Nvidia trap where the stocks can't really get the benefit of rising earnings? I think the couple of things that we're excited about, number one is packaging.

The making of the chip is getting simpler and simpler. Again, the place where these memory companies are making money is commodity dear rent, the stuff that's five years old, six, seven years old. It's the packaging that's becoming complicated. The second is what we call token dumping by China. China obviously has a long history in technology, particularly we've seen this happen in solar. We're potentially seeing it happen in autos. It's going to happen in tokens. And they are going to do what they have done for the last several decades, which is create deflation. You know, in the 90s and in the last couple of decades,

it created deflation in a good way for the U.S. That train has ended. They're now going to create massive deflation on tokens. And so we think there's an enormous opportunity to take advantage of that. And then the third thing we're excited about is SpaceX, but the legacy part of SpaceX, which is the Starlink built out. And there's a huge supply chain that also happens to sit in Asia, companies such as WNC and Taiwan, which we own, that we're also very excited about. Interesting. Really fascinating stuff. Token dumping is a real kind of clever way to think about it. Beneath, thank you very much. Really great to catch up with you. Thanks, Mike. Thanks for having me. All right. Well, stocks slightly higher today, creeping back toward those all-time highs

as the bull market began in October 2020 approaches the four-year mark. Next week, though, brings a fresh test for markets with CPI on Tuesday. Fed share Kevin Warsh heads to Capitol Hill as well. So could a rising rates be a threat to this bull run? With us now is Stephen Widing, Chief Strategist at CIO Group. Stephen, great to see you. It's funny. We talk so much about all the money in motion raised and spent in AI as this exogenous thing. It's almost like we have permission to ignore some of the macro forces. Is that okay? I mean, are we okay saying, like, eh, don't worry about the Fed. Don't worry about growth rates right now? Well, look, if the Fed can give someone an opportunity to buy something lower, okay. I mean, the reality is if they're

going to handle monetary policy differently in a tactical sense, that's a little issue. If they can't handle some future crisis because of, you know, some different way of looking at the nature of moral hazard or crisis. That's a different story. But I think what's really interesting is a great conversation you just had, we're probably in an environment of 15 to 20 percent EPS growth, including semiconductors, excluding memory chips. So the fact is we're really well supported in the economy from a profit standpoint. A lot of reasons we can't get into all of those in one sense. sentence. But we are in a really good position, I think, for us to have some standout performance in some areas like tech and still be well supported in the equity market beyond that.

So I think that that's true, even if we want to scare people a little bit with 25 basis point rate rate rate. Yeah, right. I mean, not with an intent to scare, but just to sort of say, I wonder if we're okay to not pay attention to certain things. But, you know, you say you can't into all the drivers of the earnings growth understood. I do wonder if big picture, I keep wondering about this, we're at record high profit margins across the board in aggregate. You're pretty much at a high for profit share of GDP, and yet we're talking about accelerating profits from here. Are we stealing from the future? Are we over-earning today? Is there anything to worry about on that front? Well, I think that there is, if we take a look at a real long-term context,

You know, just think about, we know pretty clearly hyperscalers that are borrowing to buy AI infrastructure equipment, they're boosting those profits. That is money that is borrowed from the future to boost profits today. And the same way, when we broadly across the economy run chronically large budget deficits, and no one offsets that. Like, no one says, you know what, I really need a high personal savings rate because we're going to bankrupt our government. No one does that. There's no recording equivalence or something like that. So we end up with a pretty

low national savings rate. It's one that's come down over time. We're living for today and we're profiting today. So profits are way above trend. There will be some give back to that. I tend to think of, I worry more about cyclical factors, you know, whether or not everybody who says, you know, the commodity memory chips, you know, will always be in shortage. That's the kind of thing I'd worry about. Sure. And are there a particular, you know, cyclical factors that are relevant right now that you think we're going to, you know, spend a lot of time in the second half of this year, you know, focusing on at this point. I mean, as they say, it's 2% growth economy. Consumer seems okay. Job growth is picked up again. How does the Fed respond to that might be in the next? Well, two things. One are hyperscalers, private companies going to continue to boost AI-related capital spending at even higher rates. And I think that the equity market has doubted that a little bit, but it may be the case that no, this is not the peak, and we're going to go somewhat further. So that will be cured in the earnings reports. And then the other thing is the tactics of the Fed.

You know, we're a long way off where we were in 2025 for tariffs. We now have negative tariffs with repayments. You take a look at, you know, that particular factor. And we don't have a Fed share who's just lowering interest rates, which was one of those things that every. worried about. So the reality is it's repositioning higher in the U.S. dollar. And that's raised some concerns for us about international markets, exchange rates, interest rates. So here we are. The oil price has fallen more than 35 percent, and we have higher real interest rates. So that is a little bit of a drag. But you know what? When we have 15 to 20 percent EPS growth, 25 percent

including semiconductors, we do need a little bit of sobriety. And it doesn't hurt to have a little more Sure, yeah. So obviously those, the real rates aren't necessarily restraining a whole lot in the short term, but definitely want to be aware of what that could mean down the road. Steve Whiting, thank you very much. Really appreciate it. Have a good weekend from CIO group. Well, shares of meta higher again today, now the best performing stock in the S&P 500 so far in July. But up next, we'll be joined by an analyst who is a little concerned about the company's frequent strategy changes. You're watching closing about overtime live from the NASDAQ market sector. Stablecoin issuer Circle up 5% today after receiving approval to operate as a trust bank, giving the company the ability to directly manage reserves for its regulated stable coins. Also, Kathy Woods' Ark Invest funds purchased nearly 218,000 shares. That was just one day before the company made the announcement. Circle has been under pressure this year, down more than 17%. In fact, it's down about by two-thirds since it's high a year or so ago.

Apple shares meantime, closing right near an all-time high today, but there are still some concerns about sales in China. Mackenzie Segalos has that story for us. Hi, Mac. Hey, Mike. So Apple gaining 14% in the past two weeks, even as signs of softer iPhone demand, keep stacking up. Now, the latest is China. New counterpoint research shows Apple sales fell 9% year-over-year during part of calendar Q2, while Huawei gained share with sales up 19%. And China had just started working again for Apple.

After a two-year slump, the company posted two straight, quarters of breakneck growth, including record fiscal Q1 revenue, helped by bringing lower-tier iPhones within reach of national consumer subsidies, and holding prices steady while Android rivals raised theirs. But now the iPhone price hikes appear to be imminent as memory costs rise. Chinese consumers have already pulled purchases forward, meaning that much of that demand boost may already be behind Apple just as the market enters a seasonal slowdown. Meanwhile, Apple has reportedly cut iPhone 17. production on weaker demand, though part of that may be to conserve critical components for the iPhone

18 Pro models and its first foldable, Apple's biggest form factor change in years, which really makes September critical John Ternis' first hardware event as CEO, a potential $2,500 foldable phone, and the question of whether we get price hikes across the lineup. Mike? Mack, you lay out a bunch of pressure points there, you know, and Apple's trying to navigate in China and elsewhere. And I guess that being the case, what do we attribute the resilience in the stock to? I mean, clearly it sometimes acts defensively. People could have a view about it being an AI beneficiary without all the spending. But I'm just wondering if this represents any particular

narrative that it's outperformed in this last little while. It all comes down to CAPEX. Last quarter, Apple's CAPEX was $2 billion, down 36% from the year before. Meanwhile, you have a handful of hyperscalers who collectively are on target to spend $700 billion this year, $1 trillion next year. And Apple, a year ago, the narrative was that they were behind on AI and we should be concerned. And now, fast forward a year, and they look smart for that discipline. Because no matter who wins the model wars, Apple is the device of choice. Those 200 or those 2.5 billion devices out there, they're installed base. Really, the winning narrative is there the AI consumer toll booth. Exactly. Yeah.

So they'll be in the way of it, however it gets access perhaps. Mac, thanks so much. So are investors overlooking weakening fundamentals, or are they trusting Apple's long-term strategy? Joining me now is Needham, Senior Media and Internet analyst Laura Martin. Laura, I've got a lot to get to in your realm here, but let's start on Apple and where you think we are in terms of the hope and hype cycle around September or anywhere else. Yeah. So really, for the stock to work, they need a hardware. replacement cycles. So I think people are hoping that the foldable phone creates a hardware replacement cycle. I guess it will be delayed. It won't actually launch on time in September. But, and I am really

worried about China, and I'm really worried about component increases like memory. And so that means, prices are about to go up on new iPhones. So, and, and you know they've leased their AI life to Google, which is their biggest competitor on Android, by using Gemini and AI models created by, they're really, they're only in their core business, all of which, and we're hitting all-time high valuation. So I think the risk reward here on Apple is very tenuous. I would look elsewhere for investments here. It's a good reminder that Apple certainly has held its valuation better than a lot of the other multi-trillion dollar names that we look at. Now, one of those meta, we talk about its strength recently. It has been a real underperformer before that, but it did, at least on the surface,

look cheap, but you don't believe that this is a time to really get in there. in an aggressive way. Why is that? This morning we published a note saying we prefer Reddit, which is a $35 billion market cap to Meadow, which is $1.7 trillion. And basically what we were looking at is meta's revenue growth has been 23% total over the last two years versus three times faster for Reddit. Its margins are expanding much faster at Reddit than at Meta. And the strategy diffusion at Meta is a value destroyer. Every quarter, Mark Zuckerberg comes out and he's laying off some huge percent of his workforce and pivoting to a new strategy latest last week was we're going to do Iris with chips. He's going into competition now with Navidia. He's already

competing with Amazon in his announcement a month ago having to do with shopping agents on WhatsApp. He's competing with all the LLMs. And he's just opened his first proprietary LLM versus Lamo, which was all open. He's competing with Google Search, of course. And he's competing with Apple, right, with his quest and ray-band glasses, trying to displace that smartphone platform. So, not to mention reels and threads, which compete with, you know, X and they compete with YouTube and TikTok. So he's like in competition with five other huge companies' core business, and now he's decided he's going to go to chips and compete with in the video too. So the strategy diffusion here is very troubling, especially since it's the smallest hyper-scaler among all of these competitors that he's picking a fight with. Do you read that whatever, you call it a shotgun approach, maybe they're just laying a lot of bets, trying to sort of get a piece of the next thing?

Do you read that as implicitly Zuckerberg having deep concern about the sustainability of the moat around his core business? Yes, I do. I think there's, you know, I think if generative AI is as disruptive as Wall Street is funding, we're going to fund $700 billion in infrastructure buildup, it means that the entire web and the entire open web might be obsolete. That's possible. But the notion that what you do is every quarter, look around, see what other people are doing and go do that, which is a reactive instead of a sort of thoughtful leading single purpose reaction, I don't think we'll be successful. And just a quick word on why you believe Reddit is going to actually be able to find its way in this new world. Right. So what's differentiated about Reddit is it 100% human content. And what we've seen is they have deals with both Gemini, which is Google and OpenAI, which is Sam Altman. And we expect them to renew their deals with Reddit at higher price points than the three-year-ago deal they originally went into. Because what we see with humans is after a LLM gives a human a recommendation, they then go to Reddit, which is the top three-sided firm by all LLMs, to see what humans are saying about that same. purchase or that same advice so that there's an authentication layer by humans that algorithms

prefer, actually, and humans prefer. So I think there's going to be, I think every LLM, because there's going to be commoditization of algorithms and LLMs, lots of people competing in that space, I think human content becomes the differentiated asset, and that's 100% of the core business of Reddit. All right. That's reassuring. I hope you're right about that on some level. Laura and Laura, we're not done with you yet. Please stick around. We've got a lot more to talk to you about as we get ready for Netflix earnings coming next week. And we'll get to you in a bit on that. One of the big names on the docket. First, though, a closer look at rising energy prices and the impact on airlines and on the refiners. Plus, some of this year's hottest stocks have pulled back sharply so far in July. Is this a chance to get hot chip and memory names at a discount? Closing bell overtime. We'll be right back. Welcome back. The shares of Delta slightly lower today, despite beating earnings expectations and topping revenue as well. The midpoint of its range for the third quarter earnings, also much better than expected.

But fuel prices continue to hang over the airlines. Delta says its fuel expenses rose 77% from last year. It is expecting strong demand despite higher prices to continue to offset those cost increases. Well, oil lower once again today, but still up 4% on the week. Let's bring in Pippa Stevens for more. more on what's going on with the various markets and energy. Yeah, so, Mike, it was the first positive week here in oil four, set in the first positive week, I should say, in five amid the re-escalation and hostilities in the Strait of Hormuz,

but oil is only now back to where it was just two weeks ago. And the focus this week was squarely on the product side of the equation after Russia banned diesel exports as its refineries come under attack from Ukrainian drones, seeing the highest number of hits in June since the war began four years ago. that's according to the Oxford Institute for Energy Studies. More than 80% of the country's refining capacity has been targeted, meaning prior to the ban exports were already two-thirds lower than at the beginning of the year. So end markets were already feeling the strain.

Now, much of Russia's fuel exports go to Turkey, Brazil, and North Africa, who will now have to look for other supplies. Gasoline and diesel future is in the red today, but still handily outperforming the underlying commodity since the start of the war. The difference in those two prices, leading to big, gains for the refining stocks with Marathon Petroleum, Valero and Phillips 66, all hitting records today. Now, Mike, there is a lot of question about whether or not the $60 crack spread can be maintained. I was just talking to Kurt Barrow over at S&P Global Energy, and he says it can be

maintained throughout the rest of this month, thanks to those elevated product prices. Okay, so they have a little bit of runway there, thus the refining stocks doing so well recently. Pippa, thank you. All right, we have some breaking news on Apple. Mackenzie Seagalos is back with the details. Mack. Mike, Apple's just filed a legal action. against Open AI suing the AI startup for trade secret theft in federal court here in northern California. The suit alleging that the Frontier Lab took Apple's intellectual property in order to develop its own consumer hardware. Apple's saying in that filing that they've, quote, uncovered a pattern of theft of Apple's trade secrets by OpenAI employees who were formerly

at Apple. Now, the suit specifically naming two OpenAI executives. The first is OpenAI's chief hardware officer Tang Tan. The action describes Tan, direct. directing Apple employees interviewing at OpenAI to take Apple documents and other trade secrets. They said, Tan used those job interviews to gain insights and insider knowledge, specifically asking for details on unreleased Apple products and technologies, while also coaching departing Apple employees on how to evade security processes when leaving the iPhone maker. The second named person is a former Apple product developer who allegedly took a stolen laptop with him to OpenAI, which he then used to download highly confidential technical documents for months while working on hardware at OpenAI.

That's according to Apple. And it also includes unannounced technologies from Apple's R&D lab. Notably, the filing does not name CEO Sam Altman nor Johnny Ive, Apple's former chief design officer who now leads OpenAI's hardware team. And to that end, the main remedy here is just an injunction to get OpenAI to stop using its trade secrets along with damages. So at this point, Mike, we are talking civil, not criminal court here. Fascinating. Okay. And, Mac, I mean, I know we've heard about opening eyes efforts to create a consumer device.

What stage is that at? Do we know? Well, in November, you had CEO Sam Altman say that they had prototypes of these products. He didn't announce which ones. We haven't seen them. There's been reporting to indicate that it's very similar in spirit to what is happening in Apple's R&D lab. Glasses, potentially this pendant or pan. And so they're describing as this sort of family of devices in Apple's case, reportedly also looking at these AirPods that have cameras for spatial awareness.

And so the suit goes into very specific details about the type of technology that was stolen, one that I'll just single out here. Evidence that OpenAI is asking hardware firms to carry out a metal finishing technique that Apple had invented, another way that they've gotten an indication that Open AI is getting leaked IP from the company. Got it. Mac, thank you bringing that to us. Let's bring in Kate Rooney for more on this news. Hi, Kate. Hey, Mike. So this all goes back to this Open AI acquisition, which was its biggest in history. Open AI, if you remember, paid about $6.5 billion to acquire Johnny Ives startup. This is called Love From. It was last year. And Open AI is, again, largest deal. To date, Ive is a household name in tech. He was the designer of the iPhone. He has been working, as Mac mentioned, on this AI native device over at Open AI. I was supposed to roll out at some point later. this year, but IVE has himself. He's not a part of this legal action. His team, though, is now very much at the center of this issue. It is a group of former Apple design officers, Tang Tan, who is the former VP of iPhone product design, was at Apple for about two decades for open eye, though, Mike,

it's another legal headache at a very pivotal time for this company. As it's looking to go public, it has filed confidentially. Open AI. Also, just one recent lawsuit against Elon Musk or versus Elon Musk. It has been sued by publishers, including the New York Times. The discovery process in all of these legal issues can also be damaging, as we saw with the Musk case, that alone can be quite damaging. So the risk here, you've got reputational risk. There's also future revenue at risk here. OpenAI does not have this hardware business spot up yet, but the lawsuit could also essentially block the company from launching any sort of new hardware products that allegedly contain Apple's IP. That is all future revenue. And this was a very expensive swing by this company.

to go out and try to acquire this company. And then now obviously having these IP issues, Apple and OpenAIA, I do also have this longstanding partnership. It is not their first legal dustup. We reported earlier this year that Open AI was considering suing Apple because they were actually disappointed

with the Siri deal and that whole integration with Chad GPT. We have been seeing signs, Mike, that this relationship is fraying. I did reach out to OpenAI. No comment yet, checking my phone here now. But we just got out to them and we haven't heard yet from the company.

All right. Yeah, no, it's all fascinating, especially, I mean, just bigger picture how Open AI, Anthropic, everybody has been so aggressive in bringing in top talent from all of these companies that are sort of competitors, sort of frenemies. And clearly some degree of that is people who maybe have a head start in developing some of the things that Open AI and Anthropic want to do. It's such a good point, Mike. You're seeing this talent war in AI, California, where a lot of these companies are based, does not have non-competees. Those are relevant in the state. And so you see a lot of turnover. You see a lot of executives. You don't really have garden leave either. So the risk for this to happen is higher, I think, than what you would see in a lot of other industries. Although this is a very specific case, what Apple is alleging here is that it was blatant IP theft. Open AI, of course, hasn't responded yet.

But AI and just how quickly it's moving, how competitive it is from a talent standpoint, really does make this an issue that could be broader than just this Apple Open AI situation right now. Yeah, I mean, allegations of, you know, misappropriated laptops and such is pretty specific. I know, exactly. Like a Netflix. I know you're talking about Netflix next, but this is like a Netflix shop. Thank you very much, Kate. Thanks, Mike. Talk to you soon. Well, Netflix went from a DVD by mail company into a streaming giant, of course, and now its next transformation may be getting into live TV. The stock getting hit on that news, and up next, Laura Martin returns to tell us whether she thinks this could be a buying opportunity. The closing bell overtime. We'll be right back. Welcome back. Netflix, underperforming today ahead of next week's second quarter results. It's one of the worst performers in the communication services sector so far this year, down over 20 percent, more than 40 percent off. It's 52-week high. Now, the Wall Street Journal reports the streamer is exploring live TV channels and bundling other streaming services as it looks to boost fewer engagement and keep subscribers watching. So what will it take for investors to climb back aboard when the earnings come out? Back with us is NeNeNeck. Edom's Laura Martin. Laura, so the premise here, and it's been indicated both by perhaps the stock

action as well as other reports, is that Netflix has an engagement problem. Do you buy into that premise? And what could or should it do about that? Right. So I think Netflix needs to redefine the job to be done. And the job to be done is to aggregate luxury time and then sell ads and drive subscriptions. So I think they should be aggregating short form videos. from really talented creators on YouTube and TikTok creators, and they should be doing live TV and putting it all in the same place so that when you go to Netflix, you can find everything, preferably for free, because a lot of these things are free, right?

Because they're already on YouTube or they're on TikTok, and the connected television just gives them a bigger screen to show their programming. So I really like this pivot of, I really like the fact that Netflix is redefining. I think it should what the job to be done. is so we're buyers on this weakness. Yeah, I was going to say, I mean, they've become now kind of the incumbent. They are the first stop for TV, visual entertainment. I also think about what they're doing, for example, with Spotify podcasts, right? I mean, they have some kind of a deal there where they're, you know, they kind of show them on their platform. But do you think an actual acquisition

of either a studio as they tried to do with Warner Brothers Discovery or distribution in the way of some kind of cable or TV networks is the way to go? I think they will. I think they lost Warner Brothers. We hear that they lost Roku to Fox. My guess is when Comcast spins off NBC, which is a studio and a broadcaster, that Netflix would be a logical bidder for that asset. I think they want a studio.

They want to be bigger. They sort of want to prove to the world that they disrupted a traditional industry. And the way to do that is to buy one of the companies that actually was an incumbent. So I expect them to be to increase their size through acquisition eventually. And in a sense, to recreate that industry in different form, obviously, with time-shifted way and all this other kind of advantages, I guess, for the consumer. In terms of the results next week, what are you looking for? What do you think the street most cares about?

So they've stopped reporting subscribers, which is really unfortunate, which means the street has to really focus on revenue growth, and they cannot miss their revenue growth number. because they just had a price increase. So we want to make sure they're hitting their revenue growth numbers, despite the price increase. Otherwise, it means subs are disconnecting. We really want to look at engagement length because the World Cup has been really 44 million viewers of the USA game that they lost to Belgium. So we really want to see what happened to Netflix viewing in a quarter where the World Cup really aggregated a lot of hours or cannibalized a lot of hours. And does that mean they have to go into live sports ultimately?

Like that's an important question. Advertising revenue. They've said they're going to double-add revenue this year. We want to make sure they're going to do that, which is an execution question, because they have been really very weak on executing an advertising. So we want to see them actually keep that promise on the advertising side. Yeah, they've said for a while, okay, advertising gets early. We're trying to get scaled.

It's been a while now. So we'll see if there's attraction evident as we get the numbers next week. Laura, really appreciate you sticking around. Thank you so much. Have a great weekend. Laura Martin from Needham. you as well. Up next, Fast Money's Guy Adami on how he's trading this ongoing market rotation as the big winners of the first half sell off. Closingville overtime. We'll be right back. The winners of the

year have not been the winners of the second half, at least not yet. Chip-related stocks such as Sandisk, Micron, Intel, Corning, all soared in the first six months of the year, up triple digits, but those stocks have been losing momentum since the start of the month. All three names are down more than 10 percent. Obviously, the month's only a week and a half old. Is this just a just a lot? Is this just a little? the pause ahead of earning season or a start of a deeper sell-off. Let's bring in fast money trader Guy Adami who talking about all this stuff. How are you doing? So we talk about these momentum unwinds and reversals and factor shifts as if they're like weather events. Like they just happen. But obviously they come from somewhere, right? I mean, investors got too crowded in some

areas. Risk management or reallocation says get out. Where does that leave us? There's weather every day. And obviously there moves in these stocks. So you go back to Micron, and you go back to the March quarter, I believe. Stock made an all-time high into earnings that day. I think it proceeded to sell off about 35% over the course of the next couple weeks. Now, that looks like a blip on the screen if you look at it now. But it does happen. So the question, I guess, you have trying to answer is, are we in the midst of a similar move

to that, or is there some sort of sea change going on? Now, people will talk about Micron and Sandus, the look at valuations. But you know, historically, when these stocks are at their time, cheapest is typically when you don't want to own them unless there's some secular shift going on. And you've talked about that for a while. Now, I think there's something going on, but I think at some point the commoditization and the cyclicality of these names are going to come back into play. Right. And everyone is fixating on, oh, don't worry, they have these longer-term supply agreements, which they never had before. But who knows if that's going to hold up, if obviously

we get into a surplus type situation. The flip side of it is everybody handing checks to the memory makers has been in the penalty box to some degree, right? Except Apple. Right. No, no, exactly. That's true. I guess I mean more like people who are building data centers willy-nilly.

100%. So Amazon and Meta and Google to a degree Microsoft. So I guess the question is, does that become the upper part of the CSO? So Microsoft should be concerning for a lot of people. You know, I've said this, and I think you probably would. would agree. If it's not one of the three most important companies in the world, it should be one of the most five most important companies. And for the better part of now six or seven months, it is not traded particularly well. Now, you talk about penalty box. They're in the penalty box. But is it something

more than that? Is there something more, I'll use the word nefarious going on? And is all this spend going to come back and bite these companies and you know what? I think to a certain extent, Oracle is a good example. That's what we're seeing right now. That's what the market is saying, It is. And I'm very mindful of everyone now saying, well, they look inexpensive. They're now, they've never been so cheap relative to the market. Well, two years ago when they had these big valuation premiums, everyone was saying, yeah, that's because they're making so much free cash flow. And that's because they have these like moats that won't be penetrated. So it's tough to know whether to take the market signal on face. Free cash flow story is sort of on the other side.

Yeah, exactly. It is gone. So I think that should be concerning as well. And, you know, this is a longer conversation for a different show. But a lot of these. these companies are tapping into the debt markets. The bond market has been selling off today, notwithstanding. I mean, there are a lot of other things to sort of watch, I think. Yeah, capital is in demand, but also a lot of supply out there. Well, you're in luck. You have another show coming up.

With Brian Sullivan. There you go. Just a few minutes. Up next here, a look at all the names set to report next week as earning season kicks off. Closing Bill Overtime Live from the NASDAQ market site. We'll be right back. Welcome back. Let's get you set up with next week's trade.

will get a pair of key inflation readings, as well as two congressional hearings with Fed Chair Kevin Warsh on Tuesday and Wednesday. Thursday brings retail sales and homebuilder sentiment, and the week closes out with housing starts and consumer sentiment. Also on tap, the first big week of earnings, J.P. Morgan, Citigroup, Bank of America, Goldman Sachs, and Wells Fargo all out on Tuesday. Morgan Stanley, Johnson & Johnson, and United Airlines are highlights on Wednesday. Netflix, the big name on Thursday. Let's now dig a little deeper into what to expect from farmer earnings this quarter. The group has been significantly outperforming the broader market over the last two months.

Angelica Peoples joins us with that. Hi, Angelica. Hey, Mike. Well, you and I have talked about that strength in pharma. So Johnson & Johnson kicks things off next week, and that stock is already up 24% this year. And, of course, the question is, can they keep up the momentum? So one key drug to watch is Trimphia. And that's a shot for autoimmune conditions like assertive colitis.

and Crohn's disease, and it's playing a major role in helping J&J grow through the patent cliff of its once largest drug, Stolara. And sticking with immunology, investors also will be looking for any early signs of how the launch of J&J's new psoriasis pill Icotide is going. And that drug also has implications for AVVVie, which faced a ton of questions last quarter about their expectations for J&J's pill and what that will mean for them. But, you know, AbbV's really changed the narrative since then after they announced their intention to acquire Apogee therapeutics for almost 11 bills.

million dollars last month. And then you have Merck and Bristol-Ber-Squib, and they both have major catalysts later this year. So we'll be listening for any updates there and what they expect. But on the other hand, you have Pfizer, and they've had even more questions about their pipeline. After a recent cancer drug failed, a clinical trial. And then, of course, you have Eli Lilly and Novo Nordisk, where all the attention is on sales of GLP-1s. You have your shots, pills, both in the U.S. and internationally. So much to watch this quarter. Mike. For sure, Angelica, you mentioned that AbbVee deal. The market really liked it. Stock went up on that. It seemed like it put a lot of folks on notice that maybe what they want to see is these big pharma companies looking after their patent cliffs on the way and doing something about it with acquisitions. Yeah, and what's interesting about the AV example is that they have already gone through that patent cliff. They had their largest drug, Humera, go off patent a few years ago, faced biosimilar competition. They grew through that. They proved.

that they could do it with Skyrizi and Rinvoke. And then people said, okay, that's great, but we want you to do something else. And that was the concern last quarter, was what else do you have? We want to see you do something interesting. They went out, they said they were going to buy Apogee, and people really liked that. And of course, you see Lily do something else. So that's the question is, what else do you have? Yeah, no doubt about it.

That's always the question on Wall Street. Angelica, thank you very much. S&P closes 7575 within 1% of its former record high. We'll see how it goes when earnings start to end. hit that does it for overtime fast money begins right after this quick break