Power Lunch - Power Lunch 6/29/26

Episode Date: June 29, 2026

CNBC’s Kelly Evans and Brian Sullivan take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. ���Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks are on the move, especially the NASDAQ on this shortened holiday week. The AI trade has been the engine, the mega caps, the chip names, the infrastructure plays. But today the question is whether that leadership is broadening or starting to look stretched. Our guest host today says the markets are at an interesting juncture of AI versus the rest. Surat Serti will be with us all hour. Welcome, Sarat. And welcome to Power Lunch. I'm Kelly Evans. Brian is out today. Big moves in media and telecom to discuss as well. Comcast rallying, although only 6% now.

after announcing plans to spin off the rest of NBC Universal and Sky and Charter is moving higher as investors game out what a slimmed-down Comcast could do next. And a sign of just how much the market has changed, Alphabet officially joins the Dow today, replacing Verizon, another blue chip benchmark leaning further into tech, the cloud, if we could call it that, and AI. Julian Emanuel of Evercourt ISI,

Jordan Klein and Missouho are both here with us to discuss this hour. So let's get right to it, and bring in DCLA Sarat SETI, who, as I mentioned, is here on set, with some questions about the push and pulserrat playing out between AI and the rest of the market. Julian is also with us. He's the chief equity and quant strategist at Evercore ISI. And by the way, not worried about the tug of war of bullet. What is your year end price target, Julian? 775. So any comment about, you know, how we're kicking off the week today? Look, there is much to be said about this idea that, you know, you had this incredible rip in technology off the month. March 30th low, people were hedged. And then the last few weeks, in an environment where we're a little

less sure about the course of monetary policy, at the same time, we're a little bit more sure that we're going to have capital raises after capital raises. There's some stress within, you know, technology. But from our point of view, the sentiment is not terribly positive. And counterintuitively, that's a good set of coming into earnings. Sarat, tell us about how it's not terribly positive. Well, because you had this rally and this barbell and quality companies. It used to be money would come from value stocks and you'd move into growth stocks. But you've also got quality companies now getting derated and multiples coming down on a lot of good companies, not just the value companies. And I think until we see that broadening. So you think quality is being derated,

but I hear the S&P equal weight is, is it all-time highs? So, but then within that, if you look at kind of what are the true companies that should be even higher, like a thermal Fisher, American Express, all these companies have kind of come down, even though the equal weight has kind of stayed there or gone up, but where is quality kind of owned right now? And you're in the middle of kind of where should I be as an investor because you're getting punished to own those stocks, but you're not getting punished to buy anything in semiconductor related or AI related, which is really leading the charge. Do you want to comment, Julian, on why that's the case? Well, so I'll just sort of redirect it for a minute. You know, again, if you look at the NASDAQ and

technology broadly over the last couple months, the semiconductor names have done all of the heavy lifting. And, you know, specifically the memory names, some of the semis, the biggest one, in fact, has been a laggard. We actually think that the broadening is likely to occur into earning season amongst large cap technology. Wait, didn't we just, what's today? So we're finishing the quarter now? Earning season is, what, two weeks away already? Two weeks away. And And very often you see sort of a change of a view, a change of positioning, particularly now at the start of the half year. And we think the Mag 7 might be set up very favorably here. They have been left for dead.

I remember three years ago, Dan Skelly at Morgan Stanley, was saying they're stupid cheap. And they're in some ways. I mean, Microsoft's still at, you know, sub 20. Look, stupid cheap is not, you can't really say that too much. But relative to where they've been and relative to the rest of the S&P 500, the NASDAQ continues to trade at a multiple that is as compressed relatively as it was before the pandemic. That's value. Fascinating.

So I think to your point, I think the catalyst to get the MAG7 going, and you can take Microsoft out of it just because it's considered kind of a software stock and the software stocks have their own issues in the market. But the MAG7 needs to really focus on what is the CAPAC? and what is the ROICC? Do they need to pull back? We remember for the last couple quarters, the message from investors has been, we have to make sure they're still spending for the AI trade to work. They have to raise those estimates.

Should they be pulling back now? Well, they got penalized this quarter for saying that, right? They're down because it's who's doing well. It's the semiconductors, and it's really actually the memory people who are getting the money from. The takers. So they have to come back, and it's kind of like we used to have meta being the poster child in that, right? What are they going to say now, oh, this is about, quarter. That's a good quarter. So they have to be aligned as to if you're covering your free cash flow and you're raising debt or equity like Google did, what are the reasons you're doing that and do you see anything? Otherwise, you're just getting great free cash flow companies that are just spending it on CAPX and we don't know the RIC. So investors are asking now, they were, you know, before it was like, hey, we'll give you the free pass. No free pass. That's what the max is.

Well, and weirdly, Julian, the more CAPX they do, it seems like the better the rest of the market, you know, that's taking that would do. But if they pull back, even if the Mag 7, if the investors go, okay, we're going to pull back a little bit. That's appropriate. Maybe they wouldn't. Maybe they'd freak out. But if they pull back, what happens to the rest of the AI trade? There will definitely be some volatility at that point. Now, would it be temporary? It's entirely possible because there is this line of thinking that says a pullback in CAPEX, sort of a breather, might be, you know, sort of the pause that refreshes. Look, it's our base case that that isn't going to be the case. In fact, our semiconductors analyst is expecting hyperscale a cap-ex to be on the order of a trillion

one in 2027, so that's substantially higher. But at some point, the narrative changes that, you know, you have a peak or you have certainly a slowing of the rate of increase. But we think, again, that price and valuation and their earnings power away from what their spending is substantial enough to support these names. But I think the market will dictate that, Julian. If the stocks keep on going down to the Mag 7 and they can actually have discretionary capital and say, hey, you know what that project we're doing in two years? We're going to pull back a little bit. That will then go from the takers to the spenders. Exactly. I think so. It will be a

pushbowl and be very interesting to see and kind of going into earning season what the action of some of these semiconductor, especially the memory name. Oh, yeah. Or look at SpaceX. They're just the latest. They're new name to the equity market. They're whole. also going in to raise money for the AI buildout through the debt markets. Some analysts are warning about the concentration risk, Julian. What do you think? If you're not at least somewhat concerned by the concentration risk, you're not paying attention to the history of markets. Now, we're at, in terms of the S&P 500, over 40% of the weight in the top 10 names versus 25% at the peak in Y2K.

But again, it's the durability of the earn. earnings as opposed to back in Y2K, where there was lots of questions, particularly about the secondary name's ability to support the entirety of the ecosystem. And from our point of view, given that the economy is as solid as it is, and we cannot discount the fact that none of us thought oil was going to be $70 a barrel a month ago is very broadly supportive. I like just kind of going back through your top level thoughts here, that we're in a structural bull market sounds like we were talking to Steve Roth about last hour. He's like he calls it a

secular bull. You call it a structural bull. The leaders lead until the end, you say. Bull markets end with a recession, an uncooperative fed like Greenspan in 99, higher end yields or FOMO. You say none of these is yet evident. No, and it's interesting on FOMO because there's been a lot of talk

recently, but interestingly we do a client survey every Friday. We had over 500 respondents, and we ask the recent IPO of the largest IPO in history, do you think in 2026 that it will break the IPO price of $135 a share? 83% of the respondents said it would.

That is not FOMO. Yeah. And I'm in that camp too. And I think when you get the Anthropics and Open AI is kind of following, if you've got this trade still going, you're going to get a lot of capital trying to follow that trend, especially the passive side where people are going to be in the index funds or investing. So I think, you know, as long as we have a Fed that's accommodative and we have an economy that's doing well

and oil stays at 70 and a consumer that's still strong, I think you can still have a bull market. We just, my view is it will not be as fruitful unless we get other sectors to participate in which at that point, I think it could be an extended bull market, not just a narrow leadership. What do you think about the idea that the leaders are probably going to, to lead to the end? Oh, I think that's going to happen for sure. But if the others don't, it'll be a much shorter bull market than we expect. Do you agree, Julian? Well, and to Surat's point, actually, if you look at these other bull markets, and obviously 1999 is the one that people talk about the most, what happened was at the end, while the NASDAQ was going parabolic, the other

stocks started participating. So, you know, we shouldn't, one, why the Russell 2000 is doing as well as it is. You're being swept up in this, you know, sort of backdrop of the economy's okay, the labor market's okay, the geopolitics kind of always going to be tense, but seemingly okay. And valuations, given the earning strength, are okay as well. Finally, then to put a pin in it, circle back to your comment about how earnings season can often change the narrative and change the direction of the market, what are you anticipating to come out of this then? So we think it's going to be a lot like it's been. It's going to be individual companies and it's going to be, you know, individual stock price reactions based on positioning. I mean, along those lines, what we saw last week from, you know, the vanguard of the memory trade reacting positively. That may be more difficult. But again, the names that have been beaten down that have had that have high short interests that are going to beat on earnings and revenues, you're looking.

likely going to see good reactions. All right. Well, we have plenty more, different angles to hit of all of those names. Julian, thanks. We'll let you go for now. Really appreciate it. Julian Emmanuel, joining us there from Evercore. We're just getting started.

We have a shake-up in the Dow alphabet in Verizon out, but is joining the Blue Chip Index a blessing or curse. We'll debate that. After the break, a blockbuster announcement in Medialand. Comcast announcing plans to spin off NBC Universal, just months after spitting off our parent company. Versant. Is this the great start of the media unbundling? I don't know. Is it going to be rebundling to come? Stay with us.

Blockbuster News in the media world. Just months after it spin out of our parent company, Versen, Comcast is now spinning out the rest of NBC Universal. Investors are cheering the move. Comcast shares, which have lagged the market, are catching a bid today. They're up less than 6 percent, though. Still their best day in two months. Joining us now with more is our David Faber. Stratt Setti is still with us, of course, and he owns Comcast. David, what else are you hearing and learning about this? What do you make of the fading investor reaction to it? Yeah, I guess that's a good place to start, Kelly, because as you know, when we got here for squawk on the street this morning, the pre-market looked as though it was going to be up as much as 22%. That has far from the case.

And I think the reason is there had been a lot of hope that a split like this, which, by the way, is not something that shareholders were unfurbed. familiar with is a real possibility, would be met immediately with the idea of consolidation and consolidation done at perhaps a premium. NBC Universal maybe combining with a Netflix or even Comcast with a charter and being able to create value. But given the commentary we heard from Brian Roberts on the call, my own reporting this morning as well that indicated this was not set up for a sale and any number of other commentary around that. I think that hope at least for a near-term premium and some sort of consolidation play has, faded and so so has the stock. That said, you are setting up two separate companies, each with their

own capital structure, each with their own management, and each with their own opportunity to pursue their ends and try to grow. That's something as well that Brian Roberts, of course, who will continue to own 33% of voting stock of Comcast and of NBC Universal. By the way, the economics are very small, but his vote is very large. And so if he wants them to stay independent, that largely could be the case. That was something he made clear on the call, arguing about how this is going to create, obviously, a better future for both companies, Kelly, as they do control their own destiny, something we know as well.

I mean, it's not an easy road, perhaps, but the hope is that they can both navigate it more effectively being a part. It was simply an untenable situation, I think, that Comcast founded in, given the significant fall in the stock price over the last couple of years as it faces potential challenges and the like of SpaceX with a Starlink product and fixed wireless and fiber and so many other challenges to its broadband business. It's stock trading it four and a half times EBITDA. That's simply not something you can live with. You can't really sell. You can't really buy. You're kind of stuck. Something that was made very clear when it tried to mount a bit for

Warner Brothers Discovery, but was really unable to sort of get to the finish line or anywhere near it. And so that's where we find ourselves, Kelly, you know, not an unexpected, outcome in many ways, but at the same time, perhaps not with the hope of immediate consolidation. Doesn't mean it won't happen over time, perhaps, but certainly not right away. I found it pretty shocking, honestly, because if we hadn't already done Versant, if it were just an announcement of Comcast spinning off NBC Universal, I think that makes a lot of sense. I think that I think in Comcast investors might have been thrilled, but they kept Peacock. They kept NBC. They kept the sports were important. I mean, that was true. That was the narrative a few

months ago, David. And now the whole thing's being spun out. Obviously, they've already now shed some of the channels that could have been part of NBC Universal and would have made it even more valuable to some extent. But maybe the business economics of cable being what they are, I don't know what happens with the rest of the whole media space now. Yeah, I mean, you know, the way they will tell it is, and obviously it's not that easy to hear, although I'm frankly not worried about our own future, but is that the linear cable networks being on their own, is probably a good thing that they were a drag overall. There is sort of been a return of a halo to a certain extent to a broadcast network. The theme parks obviously, interestingly,

have been part of the growth story for some time, although that has slowed. It is funny, Kelly. I can go back, of course, and remember when this business was originally bought by Comcast from its owner GE. I remember it was over time. It was a state, and they bought it at a very good price. But you could also make the argument that that was the best thing about the deal all along. True. That it didn't necessarily make sense from a synergy. perspective that so many of the things that they thought they'd being able to bring to bear in terms of owning distribution and content never really happened. But they benefited from the fact they made a great deal and they bought it at a great price. So yeah, the linear cable networks a la Versant,

we're going to live on on our own. But it's a fair question to say, well, why didn't you just move ahead with a full spin at the time there and a full split really at the time there? Might have put them in a better position to compete for a Warner Brothers discovery, for example, if they had their own currency out there with which to at least say, hey, look, our stocks up when we make this bid the way Paramount was able to do. So it's not that it isn't a valid question.

There must be some really good things going on with the World Cup, huh? I was wondering if it was an IPO. I said an IPO on a Monday. I guess it happened. Yeah, no, it's not an IPO here. It's definitely the TV. It's not that anybody should turn anything else on.

No, no. In fact, because Sarat has a question for you, David. I have a question for you. So as we saw the stock price come down. When you look at kind of, you know, the potential merger targets, candidates that could buy, look at Netflix, none of these stocks are really reacting to, right? It's just, it's a sector now that is a show-me sector. And when you look at kind of a Netflix and you follow that very closely, like, what do you think's going on here now that they're not getting any of this benefit?

Yeah, I mean, listen, I think Netflix throughout to a certain extent has never been able to reclaim the territory it had when it made its bid for Warner Brothers discovery and made it clear that it thought M&A was an important part of its future, something it had never done previously. Now, it had always said that it wasn't a need to have. It was a nice to have. And of course, it's not going to have it, having not prevailed over Paramount. But there is still a belief that Netflix is certainly looking at other M&A opportunities, hence why you might think that they would certainly have interest, at least in exploring a bit at some point down the road or a merger with NBC Universal, despite the fact that, I think Alex Sherman pointed this out earlier, that the, you know,

the NBC, would you really want to own a broadcast network in O&O's? Well, maybe not, but you can figure out ways around that. On the other side, I would point out Charter is the stock of which is up, actually more than Comcast may be seen as well. Maybe something could happen there. And they did also announce this potential partnership, or at least there's, I should say, reporting around a potential partnership between Charter and SpaceX on the wireless front. But even that, you know, you'd have $210 billion in debt. You're still facing that same potential competition that is only going to get more robust, it would seem, from Starlink. And so it's also a question.

I mean, it's interesting, Sarat. You know, Comcast spent, what, $100 billion buying back its own stock over these last many years. Charter also similarly, instead of figuring out new lines of business, new ways to compete, that we've seen some other companies do successfully. It's not easy, but shareholders certainly could ask that question. I don't know if you're amongst them. Yeah, I mean, it is interesting now with what are we going to do with the free cash flow capital? And if you look at kind of what the catalysts going forward are, I mean, charters, you know, merging with Cox, see what happens there.

I think the Starling thing, you know, the same day as this gets announced, takes a lot of attention away from Comcast as well. So it'll be interesting over the next couple of days to see kind of how the stock's going to settle out as well. But, you know, these are completely disparate businesses. And don't forget, like you've got the studios, you know, Universal Studios also as part of this NBC. So how does that work? And then, you know, you look at a Disney that trades at 13 times earnings as well. So you could see a lot of, I think, juggling here as to what assets go with,

what assets to optimize the true kind of weighted average cost of capital for all these businesses. So I think there's going to be some good potential here in kind of the shareholders that stick with it. could be rewarded nicely. You know, that's, that is certainly the hope and intent, of course, of Brian Roberts, Mike Kavanaugh, Mike Angelouacus, who the former CFOCOMCAST, who's coming back to run the company as well. But it's going to take some time, Kelly, of course, another year probably before it actually occurs, that is, the actual split near Comcast shareholders find themselves with

shares of NBC and shares of the broadband company Comcast. So we'll have to wait and see as that plays out. But, you know, their hope is that. two, as Sarat said, two disparate sets of shareholders, two capital structures, two incentive management teams will be able to do better than what they've been able to accomplish together of late, which, frankly, as you know, hasn't been much in terms of at least the stock price. Absolutely. Well said. David, thanks very much. Appreciate you making the time. David Faber. Still ahead, the fastest growing ETF ever is betting on chips and memory. But the bears are making

a big bet, too. We'll unpack the flows behind the trade on DRAM. Plus shares of Alphabet, are up 4% today in its first day as a Dow component. But history shows many stocks underperform after joining the Blue Chip Index. Can Alphabet defy the odds? That's next. Welcome back as of today. Google parent company Alphabet is a Dow member. Verizon is out.

Alphabet is in. But as we know, new Dow components can sometimes have a tricky time. The curse of the Dow is a well-known thing on Wall Street. For instance, Salesforce is down about 40% since being added to the Dow nearly six years ago. while Exxon has soared over 200% in that same time frame since being taken out, could the same fate befall alphabet, which has already been underperforming? Here on set to discuss is Jordan Klein.

Well, I should say they've been underperforming this month, Jordan. To be clear, Jordan Klein is Mizzuio's tech sector specialist. What do you think about its inclusion in this whole curse of the Dow Biz? Well, I think it's a sign of the times, and it's good for the broader technology sector. I don't believe that there's some ominous risk facing Google, because they're in the Dow, actually, if you look at Apple, when they were added since 2015, the stock's up almost 900%. Wow. So some of this is timing. You know, CRM got added right coming out of COVID when the stock was, all software was at peaks. And their business change. So I think for Google,

my view is look at the businesses they have. I think that they're best positioned in all these categories to benefit from AI, enterprise, in all areas. So I think they'll do just fine. What would be a better way to pick Dow Compot? I don't know if there is. I'm being serious. I mean, if we were all to run a fund of 30 kind of leading companies, it's kind of this, what we're talking about, the Comcast thing. On some level, you have to respond to share price and performance.

Right. But it's never the end of the story. And so in some cases, like with Alcoa, we were just talking about, underperforming for years, kicked out of the Dow. Now look at Howman. It's spinout of Alcoa. All of those business spinouts have done fabulously. So it's just, I sympathize in many ways with those who are trying to craft the, and look, at the end of the day, it performs basically as well as the S&P 500.

I think that's why a lot of people don't look to the Dow is the measure of the core market and what you should be doing with your portfolio. I mean, it is the oldest, I guess, indecacy, but it's price weighted as opposed to market cap weighted. And I can just tell you from my seat speaking to institutional money managers, they really don't care about the Dow and what goes in and what goes out. they care about more the S&P, the NASDAQ, and what companies are doing and their fundamentals. And ultimately, that's going to move the stocks more than whether they're in an index and what components are in that index. I think you're absolutely right. It's a talking point as to what's in the Dow, what's not in the Dow. But at the end of the day, when you look at the market, very few people go, oh, the market was up because the Dow was up. For sure.

And especially lately, I mean, the Dow could be up 200 and the SM can be down. point three or as in the up by, you know, 1% of the Dow's down. So it's because of the price weight is 30 stocks. Yes, it encompasses our whole universe, but it's not telling you the direction of the stock market. It's really, I've never seen it, whether it's retail or institutional, you know, when you look at a performance chart, you're like, oh, how do we do against the Dow? With the, this actually raises some larger reflection points with these other, whether it's the S&P, the NASDAQ, things where market cap kind of becomes a de facto way of their entry. and exit. That's one thing. There's certain layers of governance that sometimes go on top of that.

SpaceX has obviously raised a few questions about inclusion, Jordan. So in the case of the Dow, if that were, things could rise and fall with the market caps. Obviously, that's not a criteria. I mean, their criteria is really the same that any portfolio manager would be using of what do you think is going to show the best performance kind of with the broader market and maybe a little bit extra. What would you say about the performance of SpaceX and the reaction of all of these different, the NASDAX approach versus the S&P 500. And now we've got about a week and a half or so as it's like settling in. What would you make of that? Well, I think that a lot of relative managers care about this because they have to manage their portfolio to wait against an indecis.

And if that, you know, constituents of that index are going to change, that matters for them. I would say, for me, I don't get into the nitty gritty of like, should this company be added, at what time frame should it be added? What are the, you know, key categories or things that you should measure before it gets added. I mean, ultimately, I'm trying to find stocks that I think are either undervalued or highlight ones that are overvalued. You know, whether that's SpaceX or not, we'll find out. I mean, some of this, you know, we have to wait, wait and see about the fundamentals. And that's kind of what I've been hearing your guests talk about. And you guys on the set here is like, we're coming up to earning season.

That's going to matter way more than these additions or subtractions. And it's just right around the corner. So I think it's kind of a reminder of like, look, fundamentals should matter. And in a couple weeks, we're going to find out who's doing better and maybe who's not. Yeah, and I think capital will flow in that direction, too. And don't forget, it's not just the open-ionthropic. SpaceX at some point's going to get a lot of investors that need liquidity out there, too. So at some point, that will also get factored into the market. And we'll have to see then capital allocation. Do I want to be a, you know, MAG7, do I want to be in other stocks? Yeah.

Or do I want to buy the SpaceX stock that's coming out now with other investors coming out? Quickly, Jordan, before we go, what do you make of the MAG7? This Amazon, Alphabet, and all this is not because, I don't think, because Alphabet's going into the Dow, what's driving it? Well, I think there is a lot of concern about, can I outperform owning the MAG 7 for people who have done that strategy and it's worked well for them. I think nowadays people are trying to discern of the MAG7, who's got a better position to benefit from AI or spending trends versus the other.

And it's not, you know, we own them all and we do well with all of them. It's people are getting much more discriminating. Now, I do agree that coming up for earnings, people are probably too negative and too cautious heading into earnings for these companies. I would just say, go back to April and take a look at these companies. They all traded off into earnings. Then they took off and rallied after earnings came out and they were very good. And I think, you know, you will see a similar reaction.

That's my hope. is these companies have good results. People come back to the fact that the valuations look too cheap, and the sky isn't falling. All right. Jordan, it's been great to have you here. Thanks so much. Thank you. Appreciate it. Jordan Klein of Missouho. Let's get over to Contessa Brewer now for the CNBC News Update. Contessa? Kelly, after renewed clashes over the weekend, Secretary of State Marco Rubio will brief Congress this afternoon on the initial peace deal between the United States and Iran. This will be the first widespread briefing by the administration since that memorandum of understanding was announced. earlier this month. Six people were killed after a gunman opened fire at a youth center in the German city of Stata. That's 30 miles west of Hamburg. Police said they arrested the shooter.

They're holding two other people in connection with the attack. Authorities say there is no ongoing threat to the public. And more than 140 million people are now under heat alerts ahead of the long holiday weekend. We likely will see temperatures break records throughout the central and eastern United States. The National Weather Service has advising people to prepare now by rescheduling outdoor events, making plans for power outages. Look, even in New York City, temperatures are expected to reach triple digits Thursday and Friday. When I told my dad in Arizona that he said, okay, plus humidity. How's that for hot? Power lunch will be right back.

It's been no secret. The memory stocks have been on a tear this year. Micron and Western Digital have more than tripled years. to date, Sandisk is up eightfold. The DRAM ETF that holds a bunch of these names launched in April and already has more than 24 billion in assets under management. But our next guest sees some signals of a pullback in the underlying positioning. Here with us now is S3 Partners founder and managing partner Bob Sloan with our guest host Sarat SETI. Bob, it's good to see you. Talk us through this. And incredibly, this ETF launched and has exploded. So some kind of a pullback people are

positioning for it that would be expected. But what do you see? Well, DRAM got to $10 billion faster than any ETF ever. And the short interest got to almost a billion dollars faster than any short interest metric that we've been watching in the last 22 years ever. So you just have a battle of wills. There's just obviously a massive rush to memory chips to the memory sector. And you have a lot of negative bets against that. But when you see the billion dollars are short, so somebody's in a lot of pain. And at some point, they either cover or they go deeper.

Where can you get a window as to are these hedge funds, are these individual investors, mutual funds, and what does your data say kind of for the next few weeks as to how that's going to happen? So if you looked at Micron and Qualcomm, for example, you would have seen that the active investor, whether that was hedge funds and or mutual funds, have been underweight and, or pulling back their investments over time. What you've seen is that the index investor has just plowed money in. So index equals momentum.

And you have the active managers pulling back, both at the levered investor and the unlevered investor is actually pulling back. So momentum is driving all of these stocks. It's a one-way bet, all on the flows of money coming into indexes. So if I'm an individual investor watching, what advice would you give them to say if somebody says, I'll give you two scenarios.

One of I have no exposure to this. What's actionable for me in terms of, I'm not talking shorting, but like should I buy? Or, wow, I own a lot of this, you know, and I own it because either I bought it, like shortly time ago it's done up or I bought it, you know, two years ago and now it's four times what it is. Well, price is the question. The answer is positioning. And so if you look at what positioning means, it's like looking at the facade of a building. That's the price. And what you want to know is what's going on inside the building.

So what our data shows you is that if the index flow stops, the market will go down. It's really that simple. So you have to watch the flows of indexing in these stocks. So, for example, Qualcomm is at 30%. It's a five-year-high. Micron, a five-year-high. You can look at almost any one of these stocks. Indexing is a five-year-high.

It is a mechanical function rather than a valuation function that is driving stocks. Well, that would sound anything that's mechanical. Sounds like you could take the other side of that. Well, but people don't. And that's the point, right, is that they're underweight. So if we looked at, for example, hedge fund buying over the last quarter, you'd see that they're actually, their long positions, 28% of hedge fund long positions are in information technology.

That is underway to the index. Their short interest is 32% of all short interest. So that is at index waiting. So they're skeptical about where the market is going to be going. They're actually, the levered investor is shorting the flow coming in from indexing. And interestingly, if you kind of, we were talking about the last few weeks where the MAG 7 have underperformed, have you seen a trend there, you know, in the semis? Because we've seen the semis go like this, and so what are you seeing in there? Short interest in take Micron Qualcomm. They're at five-year highs.

Wow. They've almost tripled in the last year. I mean, that's your answer. But I'm surprised people are willing to bet again. Now, I know it would be a hugely rewarding bet if they were to turn and drop a significant. amount. But trying to time that, it reminds me a little bit like Tesla in the olden days. 100%. You might think this makes no sense, or at some point it's all going to turn around, but in the meantime, you can lose a lot of money that way. That's exactly right, and that's exactly

what happened with Tesla, because zero is the biggest number in business, right? As soon as they could actually take their free cash flow and actually invest it in the business, the shorts lost a ton of money, right? A lot of people went out of business. So I think, if you look at these things and say, okay, the active position is underweight, both for the mutual fund and hedge fund, short interest way up, indexation way up. Where do you think that's pointing? Where do you think that's pointing?

It almost answers itself. In other words, if you want to buy you better by now because it could get away from you. My words, not yours, and nobody should listen to me. Bob, thanks very much. Thank you very much for having me. Great to see you. Bob Sloan of S3 partners. Shares of Super Micro are taking a hit.

According to a Bloomberg report, the computer equipment makers Taiwan offices have been rated by government authorities. This would be a widening of an investigation of alleged smuggling of invidia chips into China, allegedly through supermicros servers. Those shares are down 6% right now on that report. Coming up, a national tax for the super rich. California governor Gavin Newsom's latest proposal is reigniting that debate. We'll break down what it could mean for markets and investors next.

California Governor Gavin Newsom is calling for a national billionaire's tax. He says it's time for what he calls an economic reset. The system the American founders built was designed to prevent the concentration of power in a few hands. But we've allowed that concentration to happen anyway, slowly and in plain sight over the course of decades and decades. But we can reverse it. Newsom, who is the current favorite to become the Democratic nominee in 28, also reiterated his opposition to a state-level wealth tax at California. will vote on in November. Joining us now is wealth editor Robert Freight.

He's not for the state wealth tax. Yeah, Kelly, he's getting criticized on the left and the right because of that discrepancy. Now, he's against the California billionaire tax, which is a wealth tax, but he is now proposing a national tax. That may seem like a contradiction, but it's very simple. If you tax somebody in California based on their wealth, they can just move across the border. If you tax a billionaire in the United States, for them to move overseas and a avoid the worldwide income tax, which the U.S. imposes, they would have to pay a 25% capital gains on everything that they currently own. So the penalties for leaving the U.S. make it much more

attractive for a national wealth tax, which is the only way you can really have a wealth tax. And that, I think, is what he's saying when he's saying, I'm against the California tax, but I'm for this national tax. I think I follow that, Robert. But I guess the larger question is, What would happen if this really came into? We've seen a lot of people concerned about how they would come up with liquidity, for instance, if the California one passes. Should we expect it to gain traction nationwide? And how would that, what would that mean for investors?

Yeah. So right now, the Democratic Party is really unifying on this one economic message of taxing the wealthy. And in many cases, you know, we've seen Roe Kana come up with a wealth tax. Elizabeth Warren has a wealth tax. They all seem to have some version. We don't have any details yet on what this Gavin Newsom tax would be. We don't know what the wealth cutoff would be. For Elizabeth Warren, it starts at 50 million.

For others, it's a billion dollars. We don't know how he'd treat capital gains, unrealized gains. We don't know how he'd treat the step-up and basis. That's what he talks about when people can sort of pass on all their wealth to their kids without incorporating a capital gains tax. So until we have those details, Kelly, we don't know how it would infect. investors, how it would affect the valuation of assets, or how it would really work from an IRS perspective, which of course is one of the big issues. It's funny you mention the step-up and

basis, because that's the one I hear people kind of whisper about when you go, when you sort of sit down and go, what are we actually going to do about the deficit? How are we actually going to deal with Social Security? And they kind of go, you know, step up in basis. Yeah, it's one of those taxes that in many ways doesn't make sense. Why should you be able to accrue a gain throughout your lifetime magically upon your death, all those gains disappear for tax purposes and your kids inherit it tax-free. I mean, that doesn't seem in keeping with the spirit of a meritocracy that we wanted in America. However, you know, the Biden administration, lots of people have tried to get rid of it, and it's very persistent in the tax code. It doesn't have the same ring to it

either, Surat. Just to play the other side, it's, I think, for, you know, all the people that own hard assets, whether it's farms. and its factories, then you get people, you get family selling businesses. And I think so that's going to be the hard part to distinguish, you know, as to what asks get stepped up. And then, Robert, you know, the other issues, I mean, the question that comes to, you start at a billion, and does it come down and down and down? And then it gets way more acceptable, and then it becomes mainstream. And then what is your effective tax rate and what takes away the ability to have a Mark Zuckerberg?

You know, you look at how many companies we have here in the U.S. U.S. versus Europe, and how many companies go IPO for that reason. So there's a lot behind that, and it's also the amount of money that's created when these companies go public and the amount of taxes this individuals have done or created the jobs, the police, you know, so I think there's a lot to discuss there. It's not as simple. But yeah, we all know something has to be done, but maybe sometimes it's cutting spending, not just raising revenue. Yeah, you're right. And in California, it's called a one-time tax, but, Surat, we all know what happens to one-time taxes. They get reinstated. The following year, they get extended.

They become permanent like we have here in New York. One-time tax on billionaires becomes an annual tax on almost everybody, on 401K. I don't know. Robert, thanks very much for tracking it for us. We appreciate it. Thanks, Robert Frank. Coming up, healthcare is the market's best performing sector this month. We just got an interesting data point from Bob Sloan on that, too. Maybe we're going to use it. Eli Lilly, J&J hitting fresh record highs. Is the long-awaited breakout finally here? Welcome back. We have a news alert in the healthcare space. Angelica Peebles has the details.

Angelica. Hey, Kelly. Well, we are just learning that the FDA has chosen the first seven companies for its pre-check pilot program that's designed to accelerate the reviews of new manufacturing facilities in the U.S. So let's get to those companies. They are Eli Lilly, Regeneron, Amnil, Fujifilililililil, Biotechnology Technologies, Solaris, KREA therapeutics, Kioa, Kirin. And this program applies only to specific manufacturing facilities. and the drugs that are made there.

So it's not the entire portfolio of companies. So for Lilly, it's the Indiana site that's going to make the main ingredients of GLP1 shots and pills. So Lilly telling me that they're evaluating how this program and other initiatives from the government may impact the facility's timeline to open. And that's currently scheduled to open in 2027. And this idea, this pre-check program, is that the FDA will preview these facilities while they're actually under construction instead of waiting until the end. And that way they think that it could save companies up to 14 months and not all the time up to 14, but usually about six months.

So this could be a big improvement, Kelly. I see pre-check pilot. I'm thinking about planes. But we're talking about Sarat Abbas. I know, right. Yeah, I just want to bring Sarat Setti. And health care is a space, and we're seeing a lot of hedge fund interests all of a sudden. And I think this is really bullish for the sector because what it does at the end of the day, it'll bring down pricing. And it'll bring drugs faster to market, which will then be much better for the consumer because you're getting the drugs.

that were already approved faster, and then you'll have the ability to manufacture more. All right. Angelica, thanks for bringing that to us. We appreciate it. Angelica Peebles, more power lunch after the break. The hunt for the next CEO of JP. Well, who is really hunting for the next CEO? I think everyone wants, well, who do I know?

It's in full swing as Marianne Lake, one of Diamond's most prominent potential successors announced her retirement last week. So who is next in line? Here's what Cal she thinks. Users see a 46% chance that it's Troy Roerbaugh taking the throne. He was named co-president alongside Doug Petno. We had that interview with Petano on this program. He's 34%.

The bank's CEO, Jennifer Peepcheck, has a 23% chance. Sarat, you own JP. I do own the stock. And the history of this will tell you, we don't even know if any of those three will be there. Exactly. So we've seen so many people revolve through there. So many people are running. It's kind of like the old G before.

Who's going to be there? Who's going to be there? And until Jamie decides and he's doing a great job, you know, we will find the right person. So we'll see. but I'm not putting any bets right now. You're sticking with. You're happy with the status quo. He's doing a good job.

Exactly. Sirad, thanks. Thanks for being here. Thanks for watching. Power Lunge.