Semis At An Inflection Point… And Navigating An ‘Expensive’ Market 9/18/26

0:00The board recommends approving. Regarding that seat on the committee, we're promoting quarterly earnings. Every day, shareholders meet to discuss important matters about the company's you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say in the company's you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com slash investor choice to learn more. Vanguard Investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard Index funds that participate in investor choice. Vanguard Market Incorporation Distributor. How do you turn your strategy into action and action into impact? Bold leaders do it through transformative strategy and transactions. One's that work in practice, not just on paper. At EY Parthenon, we use an investor mindset to help you create value. How? By combining deep sector experience with AI Power Technology, so you can reimagine your business for tomorrow while building it today. Shape your future with EY Parthenon. Learn more today.

1:26I'm Melissa Lee. Come to your live studio at the Nasak on the desk tonight. Tim Seymour, Courtney Garcia, Steve Grasso, and Julie Beale. When we start off with that potential inflection point for Semisauk's group, up more than 2% today with outsized gains in names like Terradine, KLA Tencore, and Monolithic Power. But looking back at the quarter, these stocks are far underperforming software down double digits compared to a 15% gain for the IGV and Q3. And the chart master says what happens next could be key. Carter Braxton, worth out with a note this morning noting, converging trend lines in the chart. But will the socks break to the upside or break down from here? I love it when he sends this out. It's like a wedge and then the hours are up and down. And then you got to figure it out. And what's your vote?

2:26Well, I mean, Carter does a great job of breaking those things down. My sense is that Semisauk break in higher. My sense is that they've endured an enormous amount of pressure. I think, you know, we remember when we walked in this week, we had every AI leader out there over the weekend talking about maybe tapping the brakes a little bit. I think as we go into the Trump Shee summit, it's really clear that the US and China are going to find no common ground on cutting back on AI. I mean, this is kind of what it's about. It's a race for supremacy. Therefore, I don't think also on the legislative front, even though it's a midterm topic, it's not really a midterm reality. This is not going to be part of the midterm vote. I understand data centers is a popular topic. It all comes back to, there's no letting up on this story. And I think there's no letting up on the CapEx. And, you know, 1.3 trillion that will be raised next year for CapEx for the hyper scalers. All that means more growth. I think they've traded remarkably well given how negative the sentiment is. And I think you're starting to see sentiment pick up in some other Momo names.

3:27The only thing I would hold out there, or I would just say, this is subject to what's going on in race markets and oil markets. And, you know, big part of today was just what we were hearing, what's going on in the oil prices markets, North Sea premiums at record highs for refiners. I mean, this is getting worse, not better. And this is something that also is forcing all risks to come back in. Right. At the same time, I mean, Brent, coming below $100 a barrel, 10-year yield going below 5%, or saying a 5%, I mean, this sort of is permission for some of these trades to keep working. Yeah. And I think the fact that these trades have actually been holding up pretty well, despite the fact that oils have been over $100 a barrel. The Fed is raising interest rates. There's a lot of reasons that markets should be selling off. And yes, they're off their highs, but really not as much as you would think on that news. So I actually do see that as a positive sign. And I think as we get here closer to October, and we're going to refocus again on earning season now that that's coming through, I think that's going to be a positive for the markets. And I do agree with you. I think demand is not the issue with the semi-trade. Obviously, this AI Doomsday scenario that I already talked about right now is taking over

4:27the headlines. But then, going to get back to fundamentals and demand and CAPEX, I think that conversation restarts. And I do think that's positive for that trade. So when you look at the SMH, when you look at the SOC, you break it down. So obviously, the SOCs have outperformed on a year-to-day basis. And then you look at where are the estimates going? Is it higher for NVIDIA? Is it higher for micro? So I look at through those two prisms. Then when you look at the breakdown, SMH, 22% weight for NVIDIA, 5% weight for micro. Now you do the reverse. SOCs is 9% weight for NVIDIA, and around a 9% weight for micro. So I think I'm more in the SMH camp, because if earnings, they're going to be the net recipients of those CAPEX dollars of 1.3 trillion, that's moving up. They're going to be the net recipient of it. The weight is going to be on memory. So memory is going to crash, Apple and NVIDIA's margins, but the still net recipient of that money is still going to be in video. NVIDIA carries a bigger weight,

5:28and they've definitely lagged. So I'd go with SMH for 300 jack. Okay, so if the CAPEX story remains intact, the AI story is intact. Julie Beale, then do we not like hyperscalers anymore? Because they have to spend lots and lots of money still, that the pressure is not off of them. Yeah, I think that's still the very big challenge, because as there's been more and more reporting on the makeup of their AI revenue, the AI revenue growth has been certainly very impressive. But the problem is that you have massive, massive customer concentration with Anthropic and OpenAI, and to the extent that people are concerned about their ability to do that business profitably, it calls into question, what is the strength and how much am I willing to pay for this AI revenue with the hyperscalers? So I think it's still actually a pretty tricky proposition, because it's very opaque. But what I do think is, is that, at least for the next quarter or two, the semiconductors are still very well positioned. Or did we hear enough from some of the hyperscalers, like a matter about monetization?

6:28And so the narrative has shifted a little bit. I mean, it has thus far, those who can show the monetization story, or at least the path they're to it, those have been benefiting much better than those who can't. But I do think here, again, as we get into this new earnings season, that is going to be the key factor, is not only what is this last quarter look like, but that earnings, I'm sorry, the capex going forward. They keep using these phrases, like, oh, it's going to go up substantially moving forward. I think seeing what that goes up to, like, at some point, the markets are going to get concerned about that. Yeah, I think we're getting a little bit of information on our AI, and I think it's not awful. I don't think they're going to stop spending. I do think it changes the multiple we think about them. I do think the story for MegadcapTech, which over the last couple weeks, has been well supported in a world where maybe they'll spend a little bit less. I still think that the biggest stocks in the world, and again, that chart in the triple cues, or the Nasdaq 100, looks to me a lot like the semi-short. And I think one equals the other. And as we just, Steve talked about some of the mechanics and the numbers and the weightings, but I mean, ultimately the triple cues go as also,

7:30not only MegadcapTech, but also semi-sco. So I think it's a case where the entire market, and I said this yesterday, if we weren't in the month of September, I think it'd be really easy to say, and you shouldn't be trading on the calendar. I'm just saying there are dynamics out there with oil, and certainly what's going on with the inflation front. And we're waiting a couple weeks now for earnings, which typically have been that reason to give markets the next piece of information, to take the bottom-up trade higher from the top down. Everyone always loves the seasonality. I love the seasonality of the calendar, but the major event was the Fed. And once you get that behind you, where the markets look at it and say, okay, in the greater scheme of things, is 25 basis points, a quarter point, really going to let me make me pull money out of the market, the answer's no. Are earnings still there? Are they still rising? And it's still on a handful of names, right? So we still have a handful of names that are doing the heavy lifting for the indices. And as long as that still takes place, whether it's on a relative basis or not,

8:32it's still going to keep the market moving forward. Add one last thing. The majority is passive investing. People are putting money into this market, whether they know it or whether they don't, it's coming into this market. All right, we had a headline earlier this week and we didn't really discuss it because of the Fed. It happened the same day. But Nebius, the Neocloud raising prices by about 20% or so on compute, does this, how do you think, Tim, how do you think about this headline and this price increase? And what it means to Semi's, because it does prove that older Semi still have worth for longer, which is a good thing. But maybe not necessarily a good thing for the Semi-conductor manufacturers. Right. Well, it, it, it, old as new, etc. I do think it's a case that shows that there's no choice, but both there's pricing power and I think there's no choice but to continue to play the game. I think the whole, the whole kind of stakes are getting ratcheted up for everybody and it's, we even talked about it as it means for best buy. Because higher memory prices, ultimately mean higher prices paid by consumers and that's actually a good thing. So I think it's supporting everything we just said.

9:35And I think it's a, it's a valid point. I think there are a lot of stories below the surface that have been taking place, which are showing that legacy players and those folks with pricing power are exacting that upon their customers and customers can't do anything, but say I'll take some more. Yep. Well, healthcare bright spot this week, the best performing S&B sector up almost 2% since Monday, biotech and device makers were the subgroups leading the charge. Revenue Moderna Dexcom Thermo Fisher among the biggest percentage gainers. This is interesting because there's conventional wisdom out there. Higher rates are not good for biotechs. That obviously was not the case. Yeah, and I think this is also a case where people are starting to look outside of the AI trade. I mean, I think people are starting to look for other areas of opportunity. This year has been a really good example of that. And I think healthcare does remain a place that is good to be invested in. And you're seeing a lot of these healthcare names that are also mentioning how AI is benefiting them just in their day-to-day businesses. They're not having to spend these huge capex numbers, but it's making them more efficient. It's making their pipelines shorter time

10:35frames moving forward. And I think you're going to see that story continue. So I think this is absolutely something you want to be invested in. Yeah, Julie, where do you find value in healthcare? Yeah, I agree. I think that there is a lot of opportunity in these biotech names. The problem is is that they just really do have a lottery ticket approach to them. So you're probably better served with the ETF. And me, I really love these niche healthcare companies like Alamadra or even a hinge where they're really using AI to their benefit. And I think it's made them a much stronger business as a result. Well, one potential catalyst for Farmer next week is Novo's Capital Market Stay taking place on Monday. The OzonePick Maker set to give more detail on the rebrand announced this week to Novo. And it's a company in business culture shift. Chair still down 15% so far this year. Joining us for more is Mizzouho Health Care Specialist Jared Holtz. Jared, great to have you with us. There's so much to unpack on Novo. I first want to ask you about health care because in your note, you actually acknowledge that conventional wisdom about rates and biotech and how the numbers actually history proves it wrong.

11:37It's not necessarily bad. Yeah, that's what I've gotten. If you go back to 2006, I'll call it 20 years and you look at interest rates versus biotech, there really isn't that strong of a correlation. I think we all think there is because the pandemic was so vital in terms of you got a huge move in biotech to the upside rates were zero. We're never going to see that again. And that to me was such a one-timer. If you back that out of the chart, there's really no correlation. Again, I think investors are, it's almost self-fulfilling. Everyone thinks it. And so I think biotech has been a little bit enigmatic as a place to invest over the past month or so. But when you look at the data, it really doesn't show a strong link at all. All right, let's fast forward to Novo. What are we expecting if anything from this investor day meeting? I don't know actually. I think part of it is just rearticulating the fact that there is a pipeline here beyond WeGovie. I mean, that part of that is going to be Kagrasema and other drugs that we've talked about that I don't think the street is too excited about, quite frankly.

12:37I think the other side of it obviously is business development. How does the company, are they going to announce something? That's unclear, but are they going to point towards some of the assets that they might look to be interested in at least from a therapeutic segment point of view? I would expect some of that. They've been very forthcoming lately in terms of the fact that they think they need to do more deals inside of obesity and outside. That could literally be anything. I think the street is so focused on what they don't have versus rather than what they do because they've, for all intents and purposes, lost the obesity race to Lili already. If they are going to make an acquisition, which is widely expected at some point in time, would you want them to be in the metabolic space or the obesity space or elsewhere? At this point, probably elsewhere. Unless they found a modality that was so compelling, like a less frequent version of what they had or better efficacy. I'm not really sure that any of that is on the table over the near-term at least. I mean, we talked about Amgen and there are a bunch of other companies that have less frequent duration products

13:40that are in phase two or phase three. I'm not really sure how close NOVO is to that. I mean, they tried to acquire Metsara. They were outbid by Faser. That actually turned out to be a good outcome for them. I'm not sure. I think I'd rather see them go outside. I mean, the Wigowy pill has actually been amazing and no one cares. I just feel like the street is moving past obesity at least for them. And for a lot of other players on the street, I mean, the stock reactions out of other competitors on good data has been very lackluster. I think because we have all sort of determined that Lili has won at least for now. So that's where I wanted to go. So if you look at Lili's up about 7% year to day, NOVO's down 15% year to day. What's up 40% year to day, Mark? Are we all looking in the wrong direction because it became a two-horse race, but those two horses are not providing the year to day performance. Would you go in a totally different direction? Yeah, the market, again, this year, the market has essentially decided that obesity wasn't it.

14:40That was a theme of last year and the prior year as far as generating positive P&L. Merck has re-rated completely on business development decisions, in my opinion. It's gotten the focus away from this key truth of concentration. They've done five deals over the past year or so. Investors have walked away thinking that was a really pragmatic approach to changing the strategy. You really haven't seen that with Lili and NOVO. I mean, to Lili's credit, they've done a lot of smaller deals. They just have not seen the benefit on revenue yet. And NOVO just has made so many missteps. A lot of pharma companies have outperformed those two. Again, I think this market is the best one in terms of revenue, but we haven't really seen anything drastically change for either of these companies from a top-line standpoint this year. So, Jared, does this also mean that they're kind of the race for GLP from everybody else other than those two that things are cool to me? We've had numerous players, whether it was Pfizer or folks that thought that they were actually entering in the race. And at times, that was a small pop or a mildly sustainable pop. Does this say something more overall about GLP?

15:43Because again, whether it's the oral pill, whether it's price-head wins that we've priced in there, we see there's an international market for NOVO, whether it's Germany's opening up, and it still doesn't mean anything. Does this tell me that GLP is a trade is done? I think for the time being it is, we're going to have to see what happens. The big transition I think that took place this year is not that GLP's became a bad idea as an investment for companies. I just think they became more consumer-oriented than therapeutic. And the data that we've had from Lily and NOVO have actually been so good. It's tough to sort of supplant that in any way for other pharma companies. They're going to have to figure out a way to either be. No one's going to be close. No one's going to be close in terms of timing. There's now a three or four-year delay for the next best pharma company. So you have to bring something better. I just don't think we've seen that. The other thing is, like you mentioned, the pricing dynamic. We've talked about this before. It's basically the one thing that couldn't happen,

16:44which was pricing degradation to this extent. When we first started talking about this, the drugs were 1,200 a month, and now they're 300 or 400. So that's been a big thing, too. But they're selling more, to be fair. In terms of it becoming a consumer product, why is that necessarily a negative at this point? Are you implying that people roll off of it quicker? Because it seems like they may roll off, but the weekly script numbers are still pretty decent. And so people would be going back on. So what makes a difference if it's a consumer product or not? It's not necessarily bad. I think that, like you mentioned, the volumes have been off the charts. But the pricing, when it's a consumer-driven market, and you're dealing with so much out-of-pocket pay, like you are here, I think it becomes a little bit of an issue for a time. I do think we're going to get back when we get incremental data sets out of these companies and other competitors. I think GLP ones will come back. I think this was the year where we sort of, like, transitioned out of them temporarily. We'll come back to them. Jared, great to see you. Thank you. Jared Holtz of Mizuho.

17:47Which forms of do you like the best? I know we always play, what would you rather here? But I do think in this environment, I think this was laid out really well, where we're not just talking about GLP ones. It's what's next after that. And I do think that Lily's pipeline is much better than Novos. But I also think Steve rings up Merk here, which I think has really gotten past their key true to Patent Cliff, with who we're really worried about. I would take actually them over the other two. You know, back to the Novo investor day, I think they have a lot to prove, but I think they're going to reiterate the same things. It will be interesting to hear what we hear about the almost the lateral pipeline, Metabolic, and the things that you almost feel like they have something up their sleeve. But in the short run, I think it's all about pricing, where does pricing go in the US, and how much lower can it go? Yeah, so with Merk, everyone, we all looked out on Key True to potentially losing 80% of their revenues. And this is the stock that outperformed everybody. But when you look on a technical basis, another stock that's interesting is Abbey.

18:48And just cleanly on a technical basis, the stock looks like it wants to break higher. Coming up, another test for Terness, the new iPhone 18 Pro going on sale today are customers upgrading to the latest devices. And what could it mean when the foldable launch is next month? Plus, joining the party, what to expect from next week's meeting between President Trump and China's Xi Jinping don't go anywhere fast when he's back into. This is Fast Money with Melissa Lee, right here on CNBC. Melissa has been named Consumer Reports Saefez New Car Brand. It starts with our approach. Every Mazda comes standard with proactive safety features. So you're more aware of what's around you, more focused on the road ahead, and ready before problems ever start. Mazda, more of what matters to you, is that you're not the only one who's been the most successful in your life. For problems ever start. Mazda, more of what matters most to you,

19:49go to MazdaUSA.com to learn more. Consumer Reports is not indoors or promote any product. The board recommends approving. Regarding that seat on the committee, we're promoting. To go to quarterly earnings. Every day, shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard investor choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com slash investor choice to learn more. Vanguard investor's own shares of our index funds, which own shares of the companies they invest in, available for Vanguard index funds that participate in investor choice, Vanguard Market and Corporation Distributor. Being a caregiver to your love, the one is hard work. But you're not alone. AARP offers free resources and a supportive community to help you every step of the way. Explore them now at aarp.org slash family care. Welcome back to Fast Money. Apple's iPhone 18 Pro and Pro Max are now officially on sale, marking the first product launch of CEO John Ternes' still short tenure. For a look at how demand stacked up to previous launches

20:51and what it means for the tech giant, let's bring in Mackenzie Segala. Hey, Mack. Hey, Mel. Even with shares lower today, Apple still up 24% this year, more than double the S&P's gain and the best performing Mag 7 names. The question is what has to go right from here? And on the hardware side, Apple's facing very tough comps after the 17 Supercycle. And while early lead times for the new Pro phones are a little shorter than last year, Morgan Stanley says that doesn't necessarily mean weaker demand. Apple is nearly 20% more pro and Pro Max supply this time around, so greater inventory can naturally mean shorter weights. The demand picture also harder to read because Apple is splitting the iPhone cycle into three distinct releases. You've got the pros now, the foldable duo next month, and then lower priced phones expected in the spring, plus some buyers may simply wait to compare the Pro Max with the duo before deciding. Now, the street says the better brawmater actually comes two weeks from now when lead times typically peak. And we'll see whether they keep stretching or start coming back in.

21:51And then there's valuation. Apple's trading around 35 times forward earnings near the high end of its historical range, where the stock to keep working from here investors are gonna want to see earnings estimates move higher. Mel. Certainly will. Mac, thanks. Mackenzie Segalos. Julie Beale is Mac worth the price. Mac. Apple. It's a big multiple. It's a really, really big multiple. And I think that the challenge that we have is it's unusual to have these phone cycles where they're spread out so far apart. I do think that it sounds like there's a lot of interest and people feel like it's an incremental buyer that's a little bit different for the duo. But I do think that there's a real challenge for them to drive this much growth on top. So for me at this price, it's uncomfortably expensive. Tim's gonna buy a phone soon. Yeah, I mean, at least one. No, probably just one. And probably not waiting for the foldable and probably as much as that's gonna be cool. I think it's probably time to head to the store this weekend.

22:52I think the more interesting thing really on this release is China and other parts of Asia. So China's not, I think they're 25 days out, 26 days out, Japan is probably, you know, 15 to 20 out. I want to see where demand really is in the market. Certainly China, which could be a lot more price sensitive and it's a very different competitive landscape. The valuation in Apple hasn't really mattered for a long time. I think it's given the benefit here of both being defensive at a time when also balance sheet does matter and at a time this is the first time in a long time. There's really a growth story here. I think the lead time, you know, the Wall Street community likes to kind of geek out on lead times and what that means real demand. As we've just heard, this time is out the window. So I'm pretty excited. When you look at the stock price, stock price is probably 2% off all time highs basically around here and everyone was worried about the cost of the phone. But the cost of phone is being eaten up by the subsidies by the carriers. So they're taking some of that hit and then you get your trade in and then everyone does this on a zero interest monthly payment anyway.

23:54And the last reason why I think it's a buy still here is that we have services, 75% margin on that business and it's 42% of the business and growing. I think it's still a buy. Well, I mean, the margins though on these phones are in question. We'll see about them when they report earnings. But there is a question regarding memory prices but also for the duo, whether that margin will actually be higher, higher selling price for the same time more materials that go into that phone, which could eat at margins. Correct. I think that's exactly what we need to see. But I think that the idea is that if they can pass at least some of this onto consumers and I think the idea is at least based on what we're seeing today that is hopeful that that's gonna happen. It shouldn't weigh as much on their margins. I think people were fearing. But I do think they're doing a lot of things right here. People were really questioning their AI story for so long. We're now seeing that they want to have compute on device and they're starting to make this a lot more safe kind of in this environment is there to speak. But I like that they're spreading out the iPhone cycle. Like this isn't gonna do to be so chunky now in one quarter. You're gonna be seeing this get spread out. But I do agree, my biggest concern of Apple is nothing they're doing strategically. It's just the multiple on there.

24:54And I think it's just getting price to perfection. So we own it, we will still own it. But I wouldn't be adding a ton more at these levels. I think you just want to continue to hold it. I mean Apple here is more, I mean in granted, it has had to bring me multiple. But it is more expensive than almost every AI stock that we talk about. But it's multiple is relative to itself is gotten kind of silly. I just, I don't know. I kind of feel like when we talk about margins and we talk about what's going on memory prices, I also think at some point that's gonna be a tailwind. I realize we have to look out in a maybe two or three years. But at some point memory prices will come down and Apple's proving that they have pricing power. And this is where they'll actually maybe even be a margin story, but you're right, it's expensive. There's a lot more fast-winding to come. Here's what's coming up next.

25:56We know how hard caregiving can be, especially when you're juggling so many other responsibilities. You're not alone. AARP offers free guidance and resources to help you along every step of your caregiving experience. You can even get a new job, you can do it at a local market, you can also get a new job, you can also get a new job, you can also get a new job. And you can also get a new job, you can also get a new job, you can contribute into your caregiving experience. You can even connect with a supportive community of others who know just what you're going through, find the help you need today. Visit AAARP.org, Scientific D spoons. This is a Sound of Your Kid. Just be in a kid. Just be your fun, nothing standing in their way. When allergy symptoms hit they need relief. Clearly, CLAIRT and Jr.'s MAX- Strength 2 hour relief from allergies so your child's symptoms don't slow them down on the field or in the classroom.

26:57It is the only non-drowsy max-strength chewable for kids among OTC oral allergy brands and features a kid-approved great taste. Help them miss fewer moments. Use as directed for children 6 plus, Clarets and Clears. One did work become so much work. The meeting about the meeting, the hundreds of files to find one insight. Setting aside the things you want to do for the things that pop up, here work days gone. But what if the insight surfaced itself? Or you could ship the deck without the distractions? Gemini Enterprise helps you get that done. It's AI that knows your business with agents that take stuff off your plate. Make work less work with Gemini Enterprise from Google Cloud. Welcome back to FastWanny. We are getting new details on who we'll attend next week's state dinner between President Trump and Chinese President Xi Jinping. Sam B.C.'s Megan Kaselez got the latest Megan. Melissa, that's right. It is turning into quite the CEO's studied event next week. So far, CMBC has confirmed that in videos, Jensen Huang, open AI, Sam Altman, Jamie Diamond

28:02of JP Morgan and City Groups, Jane Frazier are all expected to be in attendance at the dinner Thursday evening. Now, ultimately, we expect many other big-name tech CEOs to also confirm their attendance as well. Remember, Jensen Huang attended the state dinner that she hosted for President Trump in China back in May. Elon Musk and Tim Cook were there at the time as well. So we'll see who gets added to this list and whether any Chinese executives joined the rakes as well. Now, the U.S.-China events around the state visit really kick off in earnest this weekend. That's when Treasury Secretary Scott Bessent will be leading meetings with his counterpart. I'm told those talks will focus on AI, trade, rare earths, and other economic issues, and that those working-level talks could continue into Monday. So that's where we expect any major deliverables to mostly be hammered out. That would be ahead of the leaders meeting. Based on my reporting, so far, though, Melissa Expectations for major announcements from the summit are pretty muted. We could see things like an extension of the trade truths, possibly the establishment of an AI safety dialogue. So that's the sort of thing we'll be watching for next week.

29:04Melissa? All right, Megan, there's also been some developments on Greenland in just the past few minutes. What do you know there? Yeah, just in the last few minutes, the President posting on true social about this. He says that the United States has entered into some sort of a new security agreement with Denmark over the security of Greenland. He says it will give the U.S. permanent control over security in Greenland, and that it means no adversary can have a military presence there. He says this will also be at no cost to the United States just breaking here. So we will definitely need more details to find out what if anything will actually change in practice. We also need to hear from both Denmark and Greenland on this. I'll say, Melissa, for now, given that the President does say in this post that this arrangement will satisfy the concerns that he's had, it could at least mean the President will stop trying to annex or purchase Greenland or at least stop talking about it quite as much. Melissa. All right, Megan, thank you. Megan Kasella, it doesn't sound like anything. At least considerable will come out of the summit, but at the same time we are looking at sectors. Ag.

30:05Yeah. Did you mention tech? I think the ad gets a benefit because China walks into this thing with the biggest trade surplus they've ever had. It's a bit ironic, right? This is what all we're talking about in terms of the trade front, and China's never had a bigger portion of global GDP at this point than they have now, but also on the just the surplus front. I don't think they're going to get anything done on AI, and therefore I think that underpins the argument in favor of the demand side. I do think there are stories that can be worked out. I think the thing I feel good about both geopolitically and otherwise is I think the diplomatic channels between the US and China are as open as they've been in a long time, and I wouldn't say that about their core trading relationship. So I think it's generally bullish. I do think that there's dialogue there. I think China's always done what they've wanted to do with intellectual property, and that's not going to change. I would just quickly jump over to Alibaba, which is really underperforming and trying to tech. To me. Wow. I think that's not going to work out. The story around their cloud monetization and their AI growth, and certainly their open-source

31:07models is one that's, to me, so bullish to the stock performance that you have to scratch your head. I just think trading around China tech is something that's not always based on fundamentals, but some of this could be a trigger for China tech. Julie, what do you think China's tech here? Yeah, I agree. I think that the more I learn about how they're approaching AI, I think the more we could really learn from it. They have been really careful and thoughtful about their regulation in terms of what they allow as far as deep fakes. You see Sam, they're really trying to be thoughtful about it in terms of using it as a tool that helps rather than gets rid of people. I think they've really demonstrated an ability that's thoughtful. So I think it would be a great opportunity to learn. I don't think we will. But I think that any kind of discussion about what are possible safety approaches would be great. You know, I just don't think this administration is interested in that. Coming up, finding opportunity in the market swings where next guest is putting money to work, heading into Q4 and her playbook for navigating the AI and tech trades, don't

32:10go anywhere. More fast money and two. Mr. Moment of Fast catches any time on the go. Follow the Fast Money Podcast. We're back right after this. Welcome back to Fast Money. Stocks dropping up a vault a week with the Dow down 1.7% since Monday. It's worse week since March. The S&B 500 with a small gain today, but virtually unchanged for the week. Nasak and Nasak 100, though, logging gains, each posting their third positive week and four. And crypto cruising higher today, Bitcoin trading near $81,000, despite the recent failure of the Clarity Act in the Senate and the Fed's rate hike on Wednesday. What do you make of this run here? Yes. So it's all about inflows and outflows. And in June, they have the biggest outflow in a while with about $3.5 billion coming out of the Bitcoin complex as far as ETFs are concerned. Then August reversed that. So you have $3.5 billion coming into it. And September has been actually positive. So Clarity is coming.

33:11It's just when does it actually officially happen? But the tailwind has been the inflows in the ETF market have been great net net for the year, though. Outflows still about $1 billion coming out of it. So I think you want to be hesitant around the $80,000 price target for Bitcoin right now, wait till it proves itself to adding new money. All right. For what is next on the markets and rates, we are joined by Katarina Semanetti. She's executive vice president and Morgan Stanley private wealth management. Katarina, great to have you with us. You think this market's expensive and potentially brutal and too concentrated, but you're constructive. What? What else is new? We love AI. We hate AI. We love data centers. We hate data centers. I think that the one constant that investors need to focus on is that this is our reality and we have to function in it. And within this uncertainty of the market and these high valuations we need to find not

34:14only value but also quality. And it's this quality and broadening diversification not only within sectors or regional but also within technology itself. It's what's going to get us through the volatility and allow us to truly take advantage of the opportunities in this very uncertain time that we live in. Which sectors do you think are most overvalued at this point? When we look at tech, it's not necessarily being overvalued because of course it is. It is being enamored with these large 7, 10 names and it's the concentration risk. And in our view what we tell investors that this is not the time to chase these mega performers. This is the time to know what we own and being very, very selective whether it's technology, whether it's financials, whether it's healthcare, it's owning companies that are positioned for durable growth and that also have the trend not only to show positive earnings but also have positive earnings revision and have this competitive positioning.

35:17Katarina, so you're talking about asset allocation, you're definitely talking about diversification and that's I'm sure your posture is an asset manager. You really don't want to lean too heavy and almost anything and it doesn't mean you're capping out and you're hedging yourself. I mean that is what wealth managers do and I think it's smart. What do you think technology should be as a waiting? I understand all clients have different risk profiles. If the S&P is 40% tech when you add in Amazon and meta, I assume you want to be less than that. Can you give me some idea where wealth managers think about how much technology they want to have in a portfolio and today when we know it's already overweight even if you just own the market? Well, it's a very fair question and I think it's not as much about the waiting, it's about what we own because we're going from the AI enablers to AI implementers. We're looking at this monetization story so it is okay to own tech and if it is okay for S&P 500 to be overweight and tech, it's normal for investment portfolios to have a good

36:21representation or a larger, larger representation in technology. It is about being diversified within technology and being very selective about the companies. In terms of our do we own software, do we own semiconductors, do we own AI users or the companies that are going to pave the way in how our healthcare companies and financial companies and industrial are going to use AI? That's the question. It's being diversified broadly as a general term but being diversified within technology and within each sector. One thing that's weighing on investors minds this week is the Fed has raised interest rates and I think at this point they're digesting that pretty well but now the concern is do they keep hiking from here? Because can we handle one right hike or are we looking at something like we saw in 2022? We're seeing multiple rate hikes and equities don't like it as much. What is your position here on where rates going? Is this something you should be concerned about from a equity perspective? Are you changing any of your allocation based on that? It absolutely is a concern. While we don't see it repeat of 2022 whether it's going to be this broadening hype cycle,

37:26this is definitely going to be data dependent. In our view it's not the story of the rates, it's a story of the price of oil and inflation and there are a number of factors that are going to go into the Fed decision including the fact that they don't necessarily think that inflation is going down to that 2% target rate that they have and there's so much geopolitical risk. So assuming that the straight of our most situation gets resolved and we get some positive development and price will start coming down, maybe we're going to see the end of the hiking cycle way quicker than we think. But if it doesn't happen it absolutely presents risk to equities, this is going to affect them in a negative way. One thing I do want to hit quickly is cash. You like cash. I mean there's yield now. I wouldn't say I like cash but I love the fact that we can now invest in short term bonds. We can invest in three month paper, six month paper, you know year in municipal bonds, in corporate bonds and actually get some yield out of it. And this is a perfect story of making lemonade out of lemons, right?

38:29On one side of course existing bond portfolios are going to feel the pressure of rising rates but existing investors, people that are looking to place cash were diversified out of act to its risk. Higher interest rate also present incredible opportunities. Catherine, a great to see you. Thank you. Catherine Simanetti. How do you stand on CDs, short term bonds, cash? You know I actually think this is something investors want to be looking at because you bring up a good point where anybody who's in bonds right now hates that, right? Because what's happening is rates are going up, bonds are going down, are going to say why do we own these bonds right now? They're actually a really good time to be taking some profits off the table, off of your equities which are doing really well and be buying into some of these bonds especially locking into some of these rates which you know maybe we are assuming rates stay higher and if that doesn't happen you want to lock into these rates right now. So we're actually really looking to this up as an opportunity, especially some of those like high tax states like New York and California, and munis are really attractive right now. We've got a news alert on Anthropic, the Wall Street Journal's reporting the company is shifting its planned IPO to November and Thropic was reportedly expected to make its

39:30debut in October. The reported delay comes as the AI industry grapples with how to handle concerns about the speed of development according to CalShi. The probability of Anthropic announcing its IPO by November first has fallen to 6%. It will be interesting to see what the disclosures are in the S1 of Julie, when you're founder, warns about the dangers to humanity and the economy etc. of AI of the very product you're making. I really have enjoyed all of the risk sections, the SpaceX risk section is absolutely worth taking a look at because they are actually quite even handed and honest about some of the risks to any of their forecasts. For sure it's going to be a pretty central topic but I think what everyone is the most interested in are going to be the unit economics. I think there's a lot of talk about the company's ability to be profitable and inference and that's fine but there's really no world I think in the near term we're training as an extremely expensive so to not count it is weird.

40:34So I think looking forward I'm dying to see this as S1, I'm disappointed that we have to wait a little longer. Coming up a sneaker selection impacting two footwear giants in very different ways. Co-French soccer star is kicking Nike to the sidelines and what it could mean for the soft long term that is next with fast money returns. Welcome back to fast money. Nike shares getting tripped up after a French soccer star player. Killian Mimbappe pulled out his of his long partnership with the shoemaker in favor of Swiss rival on holding shares of Nike trading at more than 12 months. Excuse me I gave it the benefit of the dinner 12 years lows and on Monday we'll be kicked out of the S&P 100 barons also put out an article yesterday saying the stocks 13 years staying in the Dow could be in danger as well and yes we know money is largely not indexed to the Dow at all but just in terms of it representing great American companies this really shows how far Nike has fallen. Yeah and the time to buy X-Hon was when I got kicked out of the Dow but I mean it's often

41:39indicative of really a point where things have I'm not say bottomed out and in Nike's case the problem here is to meet ubiquity and where are the brands right now. I still want to say and I believe that Nike is the most influential athletic brand in the world and I think they have a substantial lead having said that there's an element of what's going on with the Nike shoes whether they're going into the famous footwear or what happened to underarm her is kind of what it feels like is going on with Lulu and Nike here because the competition in more exclusive brands or brands that actually aren't available in straight retail. I just think that right now Nike is not out of the woods and it's not cheap but dropping out of the Dow I don't almost make sure you want to buy it. Yeah I don't think dropping out of Dow has any any any threshold of pain for you where you should say okay it's dropping out of the Dow so I have to exit it as you said in the lead up there's a lot less passive money in the Dow chasers than there is in the S&P so it stays in the S&P.

42:40It's symbolic. It's sentiment and it's sentiment to just look at the chart so the chart from 2021 it's into declining trend line. It's got a host of reasons why it used to be King of the Hill and now it's having trouble being relevant anymore so they're still massive they're still the biggest out there but the problem is the market is so fragmented and there's probably three or four things they can do to turn around none of which they've done. Coming up Disney looking for some AI magic the new hire they are making and what it means for the changing media landscape we're fast money too. Welcome back to fast money Disney announcing it is hiring its very first chief technology officer the latest move by new CEO Josh Tamaro to expand its tech and AI footprint Julia Worson is here with more information on the story hey Julia. Well Melissa Disney is creating a new role of chief technology officer which will report

43:40directly to CEO Josh Tamaro and is hiring for this new position Karim deep and non until now he's been the CEO of character AI which is a platform for talking to fictional and custom bots with some of his team joining with him as well. Now he was formerly at Brex meta and Microsoft this moved by Josh Maros been a CEO for six months now speaks to the value he places on technology as a growth driver for Disney and also to the power he sees in AI in particular. Tamaro saying quote Karim deep brings a rare mix of experience across infrastructure consumer technology and AI saying as we further our three priorities great storytelling as our North Star technology in the service of creativity and operating as one Disney. Now this all plays into Tamaro's plan that he's talked about to use technology to deepen Disney's direct relationships with fans with Disney plus as what he calls the digital centerpiece. Melissa. Julia didn't Disney at one point have some sort of partnership and and explored characters

44:46using AI and the ability to interact with them and then decided to back away. So it did have a very big deal with Sora which was open AI's generative AI platform. Sora was going to be licensing Disney characters and enabling people to create content with them. Sora then shut down and so what that means for Josh Tamaro is probably a good thing. It means he can create his own tech vision his own AI plans from scratch. Now given how much Damaro has talked about really driving people to be engaged on the Disney plus platform. Now that they have the character AI folks I can imagine they'll have the ability to talk to Mickey Mouse or Elsa from Frozen or any number of their characters directly on Disney plus in a controlled environment. So certainly seems to be a lot of opportunity there for for Damaro's vision. And I've had parents to pay extra for it too Julia thank you. Julia Borson you've got young kids so it sounds like an interesting thing.

45:47Do you want to talk to Elsa? I know my kids love like going to Disneyland and meeting Lightning McQueen if they can talk to them every day. Yeah I'm sure my paper that actually. But I do like I mean this is really additive to their flywheel business that is what they do is they find these characters they license them they figure all the different ways that they can get to whether it's merchandise whether it's streaming you know whatever it is this is additive to that which I think is great. Up next final trades. All opinions expressed by the fast money participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television radio internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy but only as an expression of an opinion such opinions are based upon information the fast money participants consider reliable but neither CNBC nor its affiliates enter subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full fast money disclaimer please visit CNBC.com forward slash fast money disclaimer. You know it's not a great use of time getting data ready for AI that's why IT leaders

46:50turn to CDW we help unify data and govern it building the foundation for your AI and agents to deliver results because when your data is ready AI stops being an experiment and becomes an advantage we configure optimize and deliver the tech that runs business CDW make amazing happen.