Power Lunch - Netflix wins Warner Bros. Discovery bidding war 12/5/25

Episode Date: December 5, 2025

What antitrust concerns does Netflix buying parts of Warner Bros. Discovery raise? The Fed's FOMC meets next week to decide whether it should change rates.  Yardeni Research's Ed Yardeni joins to give his outlook for stocks in 2026.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks extending gains and hovering right near their all-time highs and a mega merger that could potentially reshape the power landscape in media. Welcome to power launch alongside Kelly Evans. I'm Dominic Chu on this Friday. That's all, folks. We have a winner in what felt like a multi-round boxing match for Warner Brothers Discovery and it's Netflix. But can this deal clear the antitrust hurdles and actually close?

Plus, Wall Street's forecast for 2026 rolling in, and the overarching tone is bullish. Our guest has his year-end S&P target set at 7,700. Just Ed Gardini will be here to explain on set for this new year. Now, Kelly, it's interesting overall because crypto-darling strategy has been a winner for investors up more than 800% in the last three years. But in the last three months, not so much. It shed almost half its value. We're going to discuss strategy's strategy with its CEO, Fongli.

So we're going to begin with the $72 billion deal, sending shockwaves through the Wall Street area and Hollywood as well. Netflix is buying Warner Brothers film and streaming assets, a blockbuster move after a weeks-long bidding war with Paramount Skydance and our current parent company, at least, Comcast. Now we're hearing concerns from the entertainment business. Julia Borson has some new reporting on the topic. Julia, what can you tell us? Well, Dom, the Writers Guild, just moments ago issuing a statement coming out against the deal, saying, quote, the world's largest streaming companies swalling, one of its biggest competitors, is what anti-trust laws were designed to prevent, saying the outcome would eliminate jobs,

push down wages, worsened conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers. The statement goes on to say, this merger must be blocked. Now, I've also been talking to sources close to the situation about Netflix's perspective on getting this deal done, and I'm hearing that Netflix is very confident. and regulatory approval. Now, the key point we expect Netflix to cite in this argument to regulators is that its share of aggregated TV viewing is just 8% according to Nielsen. And they've been circulating ahead of this deal, some Nielsen stats from October that show them

in 8%. Now, what's interesting about this is that right now they're in sixth place in terms of aggregated TV viewing with the merger. They'd be going up to fifth place. This is behind YouTube in first place in Disney. And the reason why Netflix is not among the first couple of players here is because it's aggregated viewing across linear and streaming. So we really expect this to be a big part of their argument to regulators. Another issue I'm hearing a lot of concerns with from folks here in Hollywood is the theatrical business. Netflix has a strategy of doing shorter theatrical releases. As a result, you have a lot of theaters that don't want to take a Netflix film for just two weeks and leave it in their theaters when it's also available at home.

We've heard Ted Sarando say repeatedly that he thinks it is in consumers' best interest to make films available at home for the relatively low cost of a Netflix subscription rather than the higher cost of a theatrical release. But we expect them to stress to regulators that they will remain committed. This is something they've said on the record. They will remain committed to Warner Brothers' discoveries theatrical release plans. now we know that some of these Warner Brothers deals are active through 2029. Others of them may be negotiated more before then. But in terms of what Ted Sarandos believes is he thinks Warner Brothers has a plan to maximize their value, including putting their films on HBO later. And he

wants to make sure that he has the opportunity to put more of his films in theaters for that shorter two-week window. So I think this is going to be an area where we see Netflix advocating for what it says is best for consumers, which is having that optionality of watching at home. Now, another thing I've heard raised among sources today is questions about this deal for Netflix that has always been a builder rather than a buyer and this question of whether they're overpaying for assets that maybe are not necessary for a company like Netflix that has been growing so much organically. Now, what I'm hearing here is that Netflix truly believes that if it were to put this, say, $80 billion that it's spending

on this deal into content, it would never be able to accomplish what it is getting with this acquisition in terms of two main things. Intellectual property, content like Harry Potter and also DC Comics, and also the deep library that Netflix has never had access to. So I think that is the argument to investors, while I'm also hearing that Netflix feels very confident in argument to regulators, though, as we saw with that Writers Guild response, we'll probably hear a lot more of that, not just from the Writers Guild, but potentially from theater chains and other studios as well. I imagine, Julia, we appreciate it.

Julia Borson, again, WBD shares still at 5% today towards that deal level, which still faces a major hurdle, the Trump administration's approval. Amon Javers has more on these antitrust concerns, and Amon has the point is going to be made because it should continue to be made that it's quite interesting to find. the administration and Hollywood both pushing against this deal. And I just wonder how long that will last. It could last through the whole fight, Kelly. This is wild politically, right? Because you just heard Julia talking about sort of establishment Hollywood, you know, sort of the iconic liberal group in the world coming out against this deal. You've got Elizabeth Warren here in Washington

coming out against the deal. She put out a tweet earlier today. She said, this deal looks like an anti-monopoly nightmare. A Netflix Warner Brothers will create one massive. massive media giant with control of close to half the streaming market, it could force you into higher prices, fewer choices over what and how you watch, and may put American workers at risk. So you've got liberal Hollywood, a liberal senator, and maybe the Trump administration in the middle also opposed to that. I heard from a senior administration official this morning who said their initial approach here is heavy skepticism. We haven't heard officially from the president yet. We haven't heard anything official from the White House staff itself yet. But if they do weigh in against this, you have this incredible moment where Elizabeth Warren and Donald Trump

potentially agree on the same thing that liberal folks out in Hollywood agree on. It is a strange bedfellows coalition developing. That's going to make it a fascinating fight over the next year. I've been calling it all day the clash of clans. And each clan is coming at it from a different perspective, but they're all kind of joining forces here. Amen, what about this idea? Again, just one quick point here. this idea that you also have the Paramount Skydance side of things, which has a connotation,

at least if you want to call it, that is being maybe tilted more towards the Trump administration. How exactly do these choices stack up? Well, I mean, that's the question for the president, right? And we have not heard from him. So we stand by. We're all sort of watching Truth Social very carefully to see if he weighs in here. But does the president want to make a move here to try to push this into the arms of Larry and David Ellison, who are his political allies and supporters. He likes what they're doing with Paramount. He likes what they're doing with CBS very much.

And so the question is, does he want to try to push this big asset, a historic asset, into their arms? And if so, what can he do, right? The Department of Justice has its own antitrust process that is a slow burn, takes a long time. In any normal situation, it would take a long time. With all of the amped up politics around this one,

it's expected to take even longer. Are there other things this administration could do to break up this deal, there are probably some things they could do to cause problems. And we'll see what the president decides to do. If he wants to flex here, he potentially can. All right, Amon Javers. Thank you very much for that. Let's bring in Muppet. Nathan's an analyst. Robert Fishman, he's got a buy rating for Netflix and Warner Brothers Discovery. So again, you heard the reporting from both Julia and Aiman. Let's handicap this. Is this a deal that gets done? Right. I mean, there's a lot of good questions that are being raised on the regulatory side.

Clearly, I think we just heard about the creative community having their own concerns. Ultimately, I think one question that hasn't been raised yet is, does Paramount Skydance go away quietly? And I think that the question there is what we're going to learn pretty quickly if there is a reaction from them and whether or not they're able or willing to go hostile here, that's something that also can come to play over the coming days. Robert, what do you make of the fact that I'm seeing this everywhere? Everyone seems to be bemoating. Oh, Netflix is going to be so anti-competitive.

It's going to hurt the independent movie theaters. It's going to hurt content creators. It's going to hurt competition. They're going to raise the price. I'm sorry, the movie business is not doing that well. Netflix might be more expensive than it used to be, but it's $18 a month. your cable bundle used to cost over a hundred, right?

So can we just back up for a second and talk about, you know, is this going to be like the government coming in to block the acquisition of Spirit Airlines only for them to go on and declare bankruptcy, for instance? You raise a lot of good points there. So I think that the question is, how do you even define the market here, right? And you talked about linear before, but when you include other digital companies and YouTube included in the larger streaming landscape. I mean, those numbers from Nielsen show how Netflix is competing with free services.

And the free services have actually been growing faster this year. And YouTube is that big dominant player in the larger media landscape. And then they're also competing with Amazon. So how the market is defined here, I think, is going to be a critical piece to this regulatory process. Where would you, as an investor, land on this. You just say, you know, Netflix, as our last guest said, and I thought she said it well, this does change kind of the story a little bit for investors, right? They've gone from a builder to a buyer. They're going into an industry that's been a little bit more challenged.

There's a debt associate. So, I mean, do you have any concerns about that? Or do you think this becomes an attractive entry point for a stock that's actually done, normally done quite well? Right. So I think from the Netflix narrative standpoint, Clearly, this raises questions in terms of if their organic growth story is different than what it was perceived to be from the outside. I think the company did hit that directly today on their conference call and spoke about their confidence in their own story and the growth profile ahead. And we still feel very confident in the monetization path that they do have through the existing engagement. But a lot of questions have been raised about whether their engagement can grow and whether or not this Warner Brothers Discovery acquisition is going to help accelerate that growth.

And clearly, you know, given the IP that comes with this, with all the Warner Brothers great content mentioned before, DC Comics, Harry Potter, as two examples, and let's not forget all of the HBO amazing content that comes with this too, Netflix does have the ability to monetize that content in a different way that even Warner Brothers Discovery hasn't been able to do today given their limited scale relative to Netflix. Robert, can I just ask one final question before we kind of conclude this for the time being?

As a fundamental analyst that covers media, is this the best possible deal for Warner Brothers Discovery? Or is there a better suitor out there besides Netflix or Paramount? Or is it either one of those guys? or is it Comcast, our current parent company? Is it somebody else? Well, we've been surprised, and we've written as much,

that this was the outcome. And I think to us, the most natural partner was Paramount Skydance. And again, back to my earlier comments, we'll see how this continues to play out over the coming days. But I think ultimately, the strategic fit with Paramount Skydance

just naturally aligned, with those two companies coming together. But at the same time, you know, what we need to understand now is what this extra monetization that we just talked about for Netflix can really do with these assets. So that's what we're going to start to dig in on

and try to better understand over the next couple weeks. All right. It's over, or maybe it's not quite over. And look at Netflix back to the $100 mark. Well off the, it's only down 3% now. They're warming up to it. Robert, thanks. We appreciate it. And we'll see if the end.

administration warms up to it as well. Coming up, shares of strategy, aka micro strategy, are lower again today by 4% as Bitcoin is back below 90K. We are discussing with its CEO Fong Leam, who is joining us for his first appearance on CNBC after the break. Welcome back to Power Lunch. Bitcoin is back below 90,000 today, down almost 5% on the year now. Crypto ran up as a piece of the Trump trade. It ran up quite sharply after Trump was elected last year, but obviously that momentum is faded. And strategy, the company formerly known as Micro Strategy, is also seeing the downside of that,

down 4% today and down 38% for the year. They popularized, maybe we could argue, innovated the crypto treasury model with their Bitcoin holdings. Here to talk us through it is Strategy CEO Fong Lee. Fong, it's great to have you here. Welcome to the airwaves. Thank you for having me, Kelly and Don. So, look, we all know that as long as the price of Bitcoin goes up, your company does quite well.

What happens when the price of Bitcoin goes down or even just go sideways? Well, look, we've been doing this for five years now, and we've seen the Bitcoin winter of 2022. And what happened when Bitcoin went down is we just kept going on with our strategy, which is issuing equity and debt and raising capital at a premium to our net asset value and buying Bitcoin in a creative way. Maybe we do it a little bit slower. a down market, but we just continue with our strategy and we've been very successful doing that. What is your average entry price at this point? Because if you had just held, if you bought all the Bitcoin 10 years ago, that'd be one thing. But if you've been buying all the way up,

then presumably some of them are in the red as it's corrected. Yeah, our average price is around $72,000. So we're still positive on our total Bitcoin purchases. What happens if it goes below $72,000? If it goes below, look, we've seen the up and down cycles of Bitcoin, right? And again, And we saw this in 2022. Nothing really changes. We trade down a little bit when it goes below $72,000. But you have to be, we were believers in the long-term asset class, right? We believe that Bitcoin is going to go up over 20% a year for the next 20 years. It's been doing that for the last 18 years. So it's one thing if your kind of average entry price goes into the red briefly, as it might, if the price goes below 72,000. But what is the level at which you might not be able to meet your debt obligations? We have, as you probably know, we just built up a U.S. dollar reserve of $1.44 billion,

which covers 21 months of our debt obligations, which is around $800 million a year. And so that will last us two to three years to 2029, and then we have 72 years worth of Bitcoin on top of that. If you assume for a minute a downside scenario, Bitcoin gets cut in half, we'll still be able to make it through to 2065 before we're not paying. our debt obligations. We have quite a long runway with our assets that we have in our balance sheet. Hey, Fong, it's, Tom, my question to you is I'm trying to figure out what exactly you think has been one of the primary drivers for the volatility that we've seen as of late in cryptocurrencies and Bitcoin in particular. I want to kind of play for you something that we heard from Tom Lee, who's BitMine Immersions, you know, executive chairman over there right now.

Just talking a little bit about the risk consummate. I want you to take a listen and see what you think? Microstrategy is probably the most important stock to watch right now, because that is the Bitcoin proxy. It's the most liquid name. It seems to me that when in the crypto world, when they're trying to hedge their longs in Bitcoin and Ethereum, they can't find any other way to hedge it except shorting the liquid stocks that are the proxies. So that's the micro-stratologies. All right. So you heard Tom Lee just there, Fong. Do you feel as though your company has become this kind of proxy instrument for Bitcoin in the public capital markets. And because of that, people have had to use your company as a way to structure certain types of views,

whether they're long or in Tom Lee's thesis case to the downside and short. Yeah, that's why when Bitcoin has a 50 ARR, 50 vol, we have a 70 ARR 70 vol, which means that in times when Bitcoin's going up, we go up more. When Bitcoin goes down, we go down more. When we entered this Bitcoin Treasury strategy in 2020, we were a way for people to get access to the underlying Bitcoin through public equities. ETFs changed that a bit in 2024. But yeah, we very much are a big part of the crypto ecosystem and the Bitcoin ecosystem,

which is why we decided a couple weeks ago to start raising capital and putting U.S. dollars our balance sheet to get rid of this FUD. And it really was FUD. We weren't going to have an issue to be able to pay our dividends. And we weren't going to likely have to tap into selling Bitcoin. But the narrative that was created, and I don't know where those things get created on social media, the news, the internet, by big banks, by big government, by environmentalists, by Luddites. There is FUD that was put out there that we wouldn't be able to meet our dividend allegations, which causes people to pile into a short Bitcoin bet. And we put that, we just addressed that.

In eight and a half days, we raised $1.44 billion is 21 months worth of dividend obligations. And we did it, one, to address the FUD, but two, to show people that we're still able to raise money in a Bitcoin down cycle. Just one, you mentioned the FUD, right, the fear, uncertainty, and doubt aspect of this whole thing. Do you believe as though this long-term thesis for investors in a company like micro strategy or a bitmine immersion or any of these treasury companies is about whether or not the viability of cryptocurrencies overall has real runway or the bubble fear is really just something that are going to be headwinds for you guys no matter what? No, I think they're bubble fears.

I think we're at the point, you know, you could argue three years ago, certainly four or five years ago, there were concerns around whether cryptocurrencies had a utility. I think we're past that. I think we've passed the Overton window. I think the U.S. government's proven that. Look, even now we have Vanguard and J.P. Morgan capitulating who have very well-known CEOs who said that they didn't think there was value to Bitcoin, and now they've changed. The dynamic, if you take a step back, is Bitcoin has gone up 45% a year for the last five years, right? It's one of the best performing asset classes in the world. You can take any small segment of time like the last two months and say we're in a down cycle.

Bitcoin is going to go away. Cryptocurrency is going to go away. But you have to take a step back. You have to have some diamond hands. You have to realize this is just volatility. Would you ever sell Fong? We would sell if we got to the point where we did not have the liquidity and we didn't have the U.S. dollar access and we couldn't sell Bitcoin derivatives.

But like I said, that's 2065 until we get there. I don't know what you're doing in 2065, but I don't know that I'll be doing this in 2065. And maybe at that point we might have to sell Bitcoin if we have a sustained 40-year down cycle. Do you think the price of Bitcoin goes ever higher in perpetuity? Or is it just that it'll get high enough and stay high enough that your strategy is fine? I think it'll go higher for the next 20 years. And I'm very bad. Heck, I'm bad at predicting things five years out.

So I think after 20 years, we'll have to see what's next, what new innovation, or in the marketplace, maybe something else would come along. But I think the coin has a pretty long runway. All right. Fong, thanks for joining us today. It's good to check in with you, and we hope to check back in soon. Thanks. Appreciate having me. Yep. Fong Lee of strategy.

All right, coming up on the show, will the executive exodus at Apple have an impact on the future of the tech giant's growth? One Wall Street analyst is doubling down on his bold call. That's coming up next. Welcome back. There's a growing talent exodus over at Apple with more departures just announced in the last 24 hours. It does raise fresh questions about the company's innovation pipeline and the road ahead for its next chapter of growth. While the iPhone maker remains a cash generating machine, investors are watching these moves pretty closely. And our next guest made a bold call back

in July that Apple needs new leadership at the top. And today, he's doubling down on that call. Let's bring in Walt Pichick. He's the tech analyst over at Lightshed Partners. You and your colleagues have been busy all day to day with a plethora of different things. But this conversation is about Apple, Walt. So take us through why you think Apple does need a real fundamental change in leadership. I mean, the focus in July was the need to get towards a product-focused CEO at the top. And at the time, it was characterized as heresy to suggest that, you know, Tim Cook,

who has had a phenomenal 14 years, you know, at the helm of Apple, you know, that he should depart or move on to the next. But like, you have large companies that go through various cycles. Like the company needed Steve Jobs to come back, right? And then Tim Cook was the exact person to have in that position for the past 14 years. Even if you go, you know, and look at some of the innovation challenges that they've had over the time, how is it solved by Tim doing what he does best. He got them into China in a big way, obviously changed the manufacturing, and everything he's done has been super positive. Now, some would argue that, okay, you know, why can't you just hire a design person to do that? You just have their chief design person leave, right? And

you've had 14 years to put that in place. Johnny Ives is obviously no longer at the company. You know, there is no great product focus person there. And at the end of the day, the buck stops at the top, right? And you, if the next era that we're entering for these companies is the AI era, like you need it at the top for someone to focus on, you know, what are the products and services, you know, that they need. Look, up to this point, it hasn't hurt them, right? Because AI has not changed how people buy their phones. You know, Open AI in conjunction with Johnny have not yet come out with the product. Google, even themselves. You know, only recently, you know, we talk about chat GPT and where, you know,

Gemini is relative to chat GPT, did anyone think six months ago that Google would catch up this fast? Now apply that to Android versus iOS. Why should we count out Google using all of their expertise in AI to push Android as a better alternative as we move to an agentic AI world? So I think for the company to prepare for that, you know, it's important to have it at the top in terms of leadership. And this would be the perfect. Well, well, here's the, no, here's the point, though. So your, your thesis is that they don't have the leadership at the top that's focused on the right parts of the AI story. My question then, and the question any board would have as it deliberates or any shareholder base is if it is not

the person that's currently in there, hypothetically, then who could it be? I guess, who's the alternative at that point? Is there a better option? My question to you is, what type of person would that be then to make that kind of a strategic shift in Apple if it is not Tim Cook? Because right now, he seems to be the one that's the one that's doing all the work. I mean, that's the board job. That's the board's job to figure that out. And frankly, maybe they've already asked Tim Cook that the answer. And since the pressure's on him, this is what we saw with Hans Vesberg two years ago at Verizon. All of a sudden, you have a lot of change underneath him because the CEO has told the board that, don't worry, I've got it covered.

I'll bring in the right people. So maybe he's basically, preserve that position for another couple years, and we'll see if Siri ends up ever being good. Like, we keep getting promise that Syria's going to get better, and it's still not good at all. I don't disagree. Now they've got Gemini, though. I mean, could there be a mutual beneficial relationship here? I mean, that's been, I think, why the stock is in part rallied, right? I mean, you have, you know, the DOJ that didn't under-judge meta, didn't provide any really strong

remedies. Everyone thought, okay, this is great. They can, you know, continue that relationship with Google. That's their AI solution. But again, the flip side of that argument is like if Google, if you're basically surrendering AI to Google just like you surrendered search to Google, way back, you know, when they originally took the $20 billion commitment to not do their own search development, ultimately does that come back to haunt you in terms of Google then taking share and having Android phones take share from you because that's where more of the development and the integration end up occurring. All right.

Well, if he wanted to go out, I mean, this is pretty much a high note, right? Walt, the stocks at all-time highs, what's he waiting for? Yeah, that's what I was going to say. Like, this is like the perfect time, right? You have people that have very old phones. You have Verizon with a new CEO, you know, pushing the entire industry to give, you know, a lot of subsidies. You can, this is going out on a high note and saying, okay, I'm handing the baton,

the AI baton to the next person that he's been grooming, you know, within Apple. It's a perfect time for him to do it in 26. All right. Walter Piedcheg, thanks for your perspective. As always, appreciate it. Let's get to Courtney Reagan now for the CNBC News Update. Hi, Courtney. Hi, Kelly. The Supreme Court just agreed to decide the legality of President Trump's order restricting birthright citizenship. The President told U.S. agencies in January not to recognize the citizenship of children born in the U.S. if neither parent is a citizen or legal permanent resident. A lower court ruled the policy violates. the 14th Amendment. A Florida judge ordered the release of grand jury transcripts in the

sex trafficking cases of Jeffrey Epstein and his former partner, Elaine Maxwell. The judge said the recently passed federal law ordering the release of files related to the late sex offender overrides grand jury secrecy rules. President Trump signed the Epstein Files Transparency Act last month, which requires the Justice Department to release materials related to Epstein by December 19th. And the U.S. will open the 2026 World Cup against Paraguay. The two teams will meet in Los Angeles on June 12th. Australia has also been selected as part of Group D, and the winner of a playoff between Turkey, Romania, Slovakia, and Kosovo will round out the group. Kelly, back over to you. All right, Courtney thanks. Coming up,

Wall Street getting increasingly bullish on 2026. We've got a lot of people talking about double-digit gains next year. Will AI and rate cuts power us ever higher? We'll discuss that ahead. Welcome back. Investors are gearing up for that big Fed rate decision on Wednesday. This says key inflation measures are out today. And they came in lower than expected, which could give the Fed another reason to possibly lower interest rates. According to the CME Fed Watch tool, the odds are now 87% that the Fed will cut rates by a quarter percentage point. That's up from 62% odds just one month ago. But our next guest says, based on the data, the Fed should not cut rates next week. Torsten Sloc is the chief economist over Apollo global management. Torsten, thanks for being with us right now. Take us through the case as to why the Fed needs to hold steady. Well, if you look at the incoming data, for example, we had a lot of discussions here now about a month ago, of course, of Tricolor and First Brands and whether the credit cycle

was about to get worse. But if you look at the actual numbers for default rates for high yield and loans, they've been going down for the last six months. So we're not seeing the beginning of a credit cycle. Likewise, if, of course, look at the labor market, jobless claims has been very low. You also look at data for job postings from Indeed has actually begun to go up. So, yes, while there might be some slowing in labor growth, that is mainly driven by slowdown in immigration and not so much driven by a slowdown labor demand.

So with that backdrop and inflation still close to 3 percent, both headline and call, it is really the case that the Fed should not be cutting interest rates next week. That's one side of the mandate, the employment side of things. Let's talk about the other side of the mandate, which is price stability. The inflation story, is that something that we have to consider right now? Well, the challenge is that we still have the inflation that's very sticky. And if you look at the outlook for inflation over the next 12 months, the expectation from the contentious is that inflation will be around 3%.

So if that's the case, and inflation, of course, gold for the Fed is 2%. And if we now have at the same time that the one big beautiful bill is, beginning in a few weeks to basically boost GDP growth and maybe even also inflation. Because remember the Congressional Budget Office is estimating that we will get a boost to GDP growth next year from the one big bill of a bill of 0.9 percent simply because of immediate expensing of CAPEX. That all argues for in the next few weeks we could begin to see employment growth begin to accelerate. We'd like to begin to see GDP growth accelerate.

And with the stock market still being at relatively high levels, there's still a very strong case including with AI and data center build out that literally all components of the of GDP will be doing better. That sounds good to me. Do you give stock market predictions, Torsten? Well, no, I don't directly give a forecast for the S&P 500. But of course, it's clear that AI continues to be very, very important.

Of course, not only for the S&P, because AI is now, of course, making up still around 35% of the basket of the S&P 500. A new development is that AI is also becoming a much bigger share of the IT indexing credit, because now the capital structure for the hyperscale scale is changing away from being equity issued to now also being debt issued. So that's why AI is now literally everywhere, not only in capex spending, in consumption and in the stock market,

but AI is now also even creeping into the IG for public IG. So that means that the index for IG is changing so much that this is also making more vulnerability for what's happening with AI story. Weighted average costs of capital are getting flux all over the place, guys. Torsten Slack with the latest there. Thanks very much. Have a nice weekend. Thank you. All right. Now, don't miss our coverage of the Fed's big rate decision on Wednesday, 2 p.m. Eastern time right here on CNBC on Power Lunch. We're going to hear from Jim Karen of Morgan of Morgan, Francis Donald, RBC Capital Markets, and Jeff Kilberg of KKM Financial. It's going to be a very robust roundtable discussion for sure, Kelly.

We were just talking about markets, so let's turn to that because it seems that Wall Street is increasingly bullish on their S&P forecast for next year. Our next guess is in that camp. He sees the S&P rising to 70s. 700, joining us to discuss his rationale. Ed Yardini is president of Yardinney research. Ed, it's the roaring 20. Who would have thought when COVID hit in 2020 that we'd be sitting here with the market of how much in the past couple of years? Is it extended by historical kind of metrics, this rally that we're in, or is this fairly normal? Well, you know, once we recovered from the sell-off during the lockdowns in 2020, it took about six months to recover. From that point, the market's up 100%, basically.

The S&P 500 is up that much, and much of that is attributable to earnings. So we've had a very resilient, very strong economy in the face of lots of shocks, and a result we've had very strong earnings, and here we are. Kelly, as you know, I think you know, back in 2020, it was November 2020, I actually first started talking about the roaring 2020s and kind of looked at the low. illusional back then, but now it looks pretty good, and the question is whether it can keep going. Yeah, because my husband, you know, when we're doing like the 529s and the, you know, there's all the numbers and the this and that, and you're like, geez, you know, you hate to

buy at the top of a three-year run, but or would it have 80% from the lows or something? Can you give us some reassurance? Well, look, I think the reassurance is in the performance of the economy. The economy has been resilient because the consumer has been resilient. I know there's a lot of controversy about whether that can continue. But I think a lot of the resilience owes to the fact that baby boomers are retiring with an all-time record high of $80 trillion in net worth. We've never had a bigger, richer, retiring segment of the population than we have right now. And they're going to be spending that money. They're already spending that money. And I think that'll continue to make the consumer resilient. It's funny that you mention that, because quickly, I've heard that

actually being part of the bear case. There are people who say they're all now doing, you know, required minimum distributions, and that's going to put selling pressure on the market structurally. Well, it's not like it all started today. I mean, as you know, those RMDs have been going on for the past several years. They're not all retiring at the same time, in other words. They certainly aren't retiring all at the age of 65. Quite a few of them are working in their 70s and maybe even into their early 80s. But the reality is the baby boomers are spending money and they can't seem to spend it fast enough

because, you know, when you put away a nest egg, you presume that you're going to be eating those eggs during your retirement. So your net worth will go down. Instead, the net worth's going up for a lot of baby boomers because they own equities. And now, Ed, it's Dom. One of the reasons why it's been curious,

the market action has been because we see so many strategists like yourself, your peers and colleagues out there, who've been incrementally, seemingly raising their targets for the end of next year just over the last couple of months. What do you think is actually driving that incremental positivity? Is it the idea that earnings are going to get better? Is it that multiples are going to expand? Is it a combination of both?

What's driving it? I think it's probably mostly earnings. I don't think most strategists, maybe not any strategist, really expect the valuation multiple to have much more upside. We're already talking about 22 to 23 forward PE, and back in the tech bubble of 1999, we got to 25 on the forward PE. So I don't think too many are expecting valuation to go higher. The stocks are already fairly expensive on a historical basis, but I think everybody's getting more confident about the outlook for earnings. Look, over the past four years, we've had the most widely anticipated recession of all times that never happened.

And the stock market has been through a lot of stress tests over the past four or five years. And yet here we are, as Kelly said, all-time record high in GDP, all-time record high in the stock market. So I think it's just more confidence in the ability of earnings to grow. And I think people are looking at all the stimulus that's coming out of fiscal spending next year. It's the nation's 250th anniversary. There'll be plenty of parties in spending that way. And, of course, the soccer games are going to be very stimulative to the U.S. economy. You know, I say, Ed, like, you're my, I watch my life trajectory.

I've gone from a hater to a lover. You know, I go, Ed was right about everything. I should have just listened to him all along, but I'm a millennial, and I had to live through the financial crisis, and I'm worried every time we go to new all-time highs in the market. And I look back, and I go, he was singing kumbaya the whole time, and he was right. But yeah, it's been so far, but look, it's not as though there aren't any risks whatsoever. You know, I'm carefully watching what's going on in the credit markets. That's where you usually see the cracks before the stock market sees it.

And you can certainly point to some issues with regards to the private credit markets. But all in all, I think with all the stress tests that the economy's been through, it's very likely that it'll remain stress-resistant. going to the rest of the decade. That's fascinating. The roaring 20s, all right, sounding better and better. Ed, thanks very much. Thank you. Good to have you.

Ed Yardinney, from Yardinney Research. All right, now to the bond markets. Treasuries are on track for their worst week in six months. Fed policymakers remain widely expected to cut interest rates at their meeting next week. But expectations for additional cuts next year have been paired amid mixed signals on the health of the U.S. labor market and others. That makes the guidance at the next week's meeting key for markets overall. with the 10 years drifting lower, as you can see there. Kelly, that was the bond report.

All right. And coming up, health care costs are heading higher. Again, here's a spoil sport for 2026, raising some concerns about affordability and how people are going to make these tough choices about savings and spending. Sharon Epperson will walk us through it. Higher health care costs are increasing concerns about affordability. Some research shows consumers are making financial tradeoffs to be insured while coping with the rising. cost of living. Sharon Epperson is here now. And shared, we're getting this on all sides when it comes to health insurance. They're about to vote on what's going to happen with Obamacare,

ACA. We've got people who just did their open enrollment and are seeing some sticker shock as well. So what are we facing heading into 2026? Well, let's talk about the 24 million Americans who are part of the ACA plans. And those 22 million of them that are using subsidies this year and want to have them next year, but that may not happen. If it does, happen, there's research that shows that their premiums could double and up a hundred and fourteen percent on average. If that happens, a new report out just this week looked at what are some of the options? What are they saying they're going to do if that happens? Seventy percent of them said, yes, we're going to try to look for a lower premium plan, but more than half, 52 percent said they will go without insurance. Forty-four percent are looking for a new job to get better insurance. And another 40 percent said that they're just going to have to have to. stick with their plan and pay the higher amount. So that is a significant number of people that are looking at maybe just going without health insurance, at least among those marketplace enrollees. Right. Can you even go without health insurance in this day and age?

Is it like car insurance? Right. I mean, it... No, you should not do that. Right. And then we have to say the vast majority of Americans, about 165 million Americans, actually do get health insurance through their employer. And among those people, though, we're also looking at higher prices. Those of us who have done our open enrollment know that we're paying more for 2026 than we did this year. And we're looking at overall, according to Mercer, a 6.7% increase in the total benefit cost for health insurance for employer-sponsored plans. Now, that includes what the employer is paying as well as that the employee is paying. But the total benefit costs, about $18,500 for next year. What am I getting?

You know, a few doctor's appointments, you know, a lot of hassle. But the reason why this has been in focus as well is that going back to the summer, the health care, the health insurance stocks have been trading horrendously, right? They've been on a nice rebound, but part of that rebound is because they were able to say, yeah, we're going to pass along a lot of price. So what happened in the marketplace that brought us to this point where they're saying to the regulators, who I guess are allowing this, we need to charge more. Well, they need to charge more.

The health costs are going up. The way that we use health care is changing as well. We're living longer. We're using more health care. And those costs are going up. The reality is, though, it's causing people to make some financial decisions that they may not have made in the past. Yes, they may be cutting subscriptions or reducing those subscriptions, figuring out where they can get lower brands in terms of their spending. But they're making savings and investing decisions, too, that are different.

Like withdrawing from emergency savings, more than a quarter of folks in a key bank survey said because of the rising cost of living, including health care expenses, they are taking money out of their emergency savings. and 12% said they're going to reduce their IRA or 401K contributions. It's going to start changing the discussion as well on future insurance costs in which you need to save in retirement for them as well. Sharon, it's a bigger conversation. We're going to have you back for sure. Thank you very much for that.

All right, guys, Power Lunch. We'll be right back. Welcome back. Important little story for you in the AI race between the U.S. and China. Keep an eye on more threads. It's being referred to as China's Nvidia, and it debuted on the Shanghai Stock Exchange, exchange, shares soaring more than five times its IPO price after raising more than a billion dollars. As the GPU maker's emergence marks another player that China hopes will create chips

that compete with NVIDIA, it's on the U.S. list of sanctioned companies, by the way, that don't receive full access to the highest level of chipmaking processes and foundries. 425%. It's Shanghai, but it's still. That's the kind of thing you would expect to see from an AI chipmaker coming out of that region of the world. The question then becomes, what is the ramp-up time between them and getting to NVIDIA. First Deep Seek was the NVIDIA killer. Now maybe this one. I don't know. Invidia's doing pretty well. I don't know. Anyway, thanks very much for joining us on this Friday.

I hope you guys have a great weekend. Thank you very much for watching Power Lunch. Appreciate you being here, Dawn. Closing bell starts now.