AI, earnings and the Fed keep investors on edge 7/28/26

AI Summary

Transcript

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 Chips, take a dip. I'm Dominic Chu, and this is your morning call.
 Good Tuesday morning to all of you, US Stock Futures. Right now, after a mixed session on Wall Street
 yesterday, are mixed yet again today. The Dow's implied higher by just about 42 points,
 the S&P down by about 23, and the tech heavier Nasdaq 100 trade down by about 290 points.
 Computer chip stocks are among the biggest lagers within that Nasdaq 100 trade so far.
 You can take a look at this Sandisk, Micron, Western Digital, Land Research,
 Arm Holdings, all off roughly four to five percent. The memory names,
 a key focus, of course, given everything that's happened over the last couple of days here.
 We'll have much more on that trade in just a moment.
 But more red arrows for energy as well after a third straight day of no U.S.
 Iran strikes. The president says he's hopeful for a deal.
 Oil prices right now are markedly lower.
 U.S. Benchmark West Texas Intermediate $80.40 off about two and a half percent.
 Three percent of lines for World Benchmark Ice Brent Crude Futures $85.56 there.
 And on the treasury side of things, as the Fed kicks off,
 it's two-day interest rate policy meeting today.
 You can see the Benchmark 10-year note yield has drifted lower.
 Bond prices higher to around 4.62 percent.
 The two-year note yield is 4.293 percent and the 30-year long bond 5.11 percent.
 Let's now get out to our top market story and a new market shop ripping across the chip and AI trade.
 Double digit losses on high-flying names in the overseas session.
 You can see here, surcircure-break triggers were once again overnight in South Korea.
 All amid new fears of emerging Chinese competition.
 The South Korean Cosby, which is highly levered to memory chip makers in particular,
 closed down almost 11 percent.
 We've got global coverage this morning with our J.P.
 Ong in Singapore and Arjun Carpal in London.
 J.P., we are going to start with you
 and that very rough session that is wrapping up in Asia.
 You guys, but not a great morning for markets out here in Asia.
 I'll let the numbers tell the story because it wasn't pretty.
 You can see that massive tech sell-off really hitting markets from Tokyo to Taipei and from Sydney to Seoul.
 We'll start off in Tokyo though because you did reference that sell-off
 because of the Chinese equipment story with regards to their brother breakthroughs
 or the reported breakthroughs in deep ultraviolet lithography.
 And that also hit the likes of equipment makers like Tokyo Electron in Japan.
 Quite hard.
 Of course, we also saw big losses from the memory chip maker Kyosya.
 It also the big tech investor, Softback, really pulling the Nik-225 down.
 But as bad as things were in Tokyo, they were a lot worse when you take a look at Seoul.
 You reference the circuit breakers early on today.
 They did almost nothing to quell the massive sell-off
 that hit the likes of Samsung and SK Hyonix.
 And also the questions as to why these big CapEx plans will result to
 and will hit negatively free cash flow for some of these companies
 really starting to take hold with regards to investors
 and risk offset them at really hitting them.
 Naver, which was the biggest of beneficiaries of that reported
 in video investment in the data centers in South Korea,
 they returned to losing ways and were pulled back down to Earth today.
 One market that matched keep its nose above water or tried to stay afloat
 was Hong Kong stocks actually.
 The Hong-Seng and the Hong-Seng tech index actually staying above water.
 But keep in mind there were some notable losers out there too,
 including the likes of knowledge atlas,
 the parent company of the AI company, Jippu AI,
 and you saw their stock plunge by almost 20% in today's session.
 Also bad for Chinese stocks, you'll hear you see
 are from the Shanghai Starship Index
 to the semiconductor index that tracks semiconductor stocks in the mainland.
 And also CXMT, the big memory chip bigger that made a huge splash in Shanghai yesterday,
 they were also pulled down by the big downturn.
 Overall, a very forgettable Tuesday so far,
 across Asia, no matter where you look, a Dominic.
 And we just hope that the Wednesday session will be a little better.
 Back to you guys and I hope the morning will treat you guys better out there in New York.
 All right, we're going to hope that as well.
 It's a little bit more mixed here.
 Jpeong and Singapore, thank you very much for that rundown on the Asian markets.
 Let's now dig a little bit deeper into that trade.
 Our senior technology correspondent,
 Arjun Carpal, is in London.
 So Arjun, can you take us a little bit through
 just the nuance around some of these trades?
 I mean, there's nothing nuanced about the price moves.
 But there is a reason why we are seeing such dramatic pullbacks
 in a certain specific part of the tech trade.
 That's right, Dominic.
 And really, the market is focused on this report from the information,
 which reported that a unnamed state-back Chinese company is developing
 or has developed a so-called deep ultraviolet lithography machine,
 or DUV machine.
 Now, these machines are critical for etching,
 effectively circuit patterns on to silicon wafers,
 and they are a crucial part of the chip-making process.
 Now, there's only really one company in the world that makes these.
 And that is the Dutch chip giant ASML.
 And yesterday, you saw ASML stock drop heavily.
 It's under pressure again this morning
 and that is spreading through the rest of the market.
 The broader narrative here is that if China continues
 to make these progress in its homegrown semiconductor supply chain,
 this could effectively cut off European, U.S.
 and other chip makers from the Chinese market as well.
 That's what the investors are concerned about.
 But it's important to look at some of the nuances
 and the caveats around this story as well.
 Firstly, the report says that this company is making
 around five machines this year.
 I want to compare that to ASML,
 which is expecting capacity of 130 of these immersion DUV machines.
 The other point here is DUV is a less advanced technology
 than extreme ultraviolet lithography or EUV,
 which was required to make the most advanced chips on the planet.
 That is not what China is managing to create at this point.
 The other big question here is around the performance of China's machine.
 Is it going to be comparable or near comparable to what ASML
 and the other big focus is around a term the industry calls yield?
 How many usable chips are made during this manufacturing process?
 Can the machines being made out of China produce a similar
 or if not better yield to what ASML machines are able to offer
 some of these chip makers as well?
 These are huge questions right now.
 The analyst I spoken to says in the near term is certainly not a big threat
 to ASML given some of these overarching questions.
 But certainly the direction of travel ahead,
 and what the market is concerned about is the continued progress
 in China's own homegrown semiconductor supply chain.
 Arjun, how much of this given the fact that we have CXMT
 and now we have this report of this DUV technology
 being perhaps more accessible?
 How much of this is maybe the upsetting of the establishment
 and that's the reason why we are seeing such dramatic pullbacks here?
 It's not just because yes, they're not going to get much done.
 They can't produce that much.
 But this is the beginning of perhaps a domestically focused supply chain for China.
 Absolutely, Dom.
 You're seeing Chinese companies try to chip away
 at different parts of the supply chain and build domestic alternatives.
 Look, I lived reported and worked in China for three years
 and it should come as no surprise that this work is going on.
 There is an incredible pool of talent,
 many of which have worked some of the biggest companies in the world
 including in the US, including in South Korea and Taiwan.
 Their expertise is in China as well.
 There is a lot of work going on behind the scenes
 and that's why often you see these moments pop up,
 these deep-seek moments seemingly out and nowhere.
 But actually this work is certainly happening behind the scenes across the board.
 We've seen it with AI models and how good the open source AI models
 out of China are becoming.
 You are now starting to see that in certain parts
 of the semiconductor supply chain.
 I think it is a fact that the semiconductor supply chain
 is incredibly complex.
 It's incredibly difficult
 and there's a reason why China hasn't been able to achieve
 comparable performance to some of the other companies.
 But certainly, you're starting to see signs and effort being made
 on these parts where they see as critical to creating a homegrown industry, Dom.
 All right, Arjun Carpoll and London with the latest there
 on what's happening with the Asian chip trade.
 Now, outside of the AI side of things,
 a busy morning also shaping up in Europe
 or Ben Boulos has more on that trade, Ben.
 Yes, good morning to you, Dom.
 And European equity markets pushing higher in this morning's trade
 stocks largely avoiding the worst of the tech sell-off that you've been
 discussing that we saw in Asia and on Wall Street.
 These are the numbers on the main European benchmark.
 You can see all firmly into positive territory.
 What are we a couple of hours now
 into the trading session in Europe?
 A busy day of earnings as well, including from LVMH,
 the owner of brands, luxury brands including Louis Vuitton,
 Dior and Moette and Shandon.
 LVMH sales across the board rose 3% to 19.5 billion euros in the second quarter.
 That was slightly ahead of expectations.
 At revenue at the luxury conglomerates,
 key fashion and leather goods business rose 1% in the period
 helped by a recovery in demand at Dior as well as Louis Vuitton.
 That was actually the first quarterly sales increase in two years.
 We're investors in press.
 Not if you look at the share price moves today.
 It's one of the fallers on the Paris index,
 the cat carol, off by around 1.4%.
 Lots of other earnings out today will keep an eye on those for you as well.
 But for now, Don, it's back to you.
 All right, Ben Boulos and London with the latest market action from across the pond.
 Thank you for that.
 Now, anxiety over the massive funding demands of that AI boom
 and nervousness about a Fed rate hike possibly as soon as this week
 are hanging over the US markets right now.
 So joining me now is Gargi Chaudry, the chief investment and portfolio
 strategist for the Americas over at BlackRock.
 This is an interesting day today, Gargi, because we have,
 of course, the earnings deluge coming.
 And we have a market that seems to be a little bit more skittish about the main drivers
 of that market that we are seeing so far right now.
 Do you feel like the setup, as it currently stands,
 is more favorable to a upside move or a downside consolidation?
 Good morning, Dominic. It's great to be here.
 And thank you for having me again.
 It's a good time to remember that more than anything else,
 markets hate uncertainty.
 And there's obviously been a lot of that in recent weeks.
 I think, obviously, this is, as you pointed out, a big week,
 35% of the S&P reporting as well as perhaps not a live meeting,
 but certainly the market pricing in about a 37% chance
 of a hike keeps a lot of investors on edge.
 What I would say here, especially as it pertains to your question with respect to,
 you know, what's going to be the next move.
 I think for most investors, what's important is focus on the fundamentals.
 When we look at earnings season so far, 83% are beating.
 When we look at where some of the beats are coming from,
 obviously, AI-related names, only about 47% of the index,
 but driving 65% of the growth.
 And then we think about the median S&P company still
 up about 9% expected earnings growth, which was about 5% one year ago.
 So a lot there to be excited about in the equity markets.
 And we remain very optimistic, despite seeing some of the recent volatility in the markets.
 Gargi, optimistic, yes.
 And I think generally, if you're an investor in the market,
 please, you are generally more long-term optimistic.
 But it doesn't change the fact that we had a very large,
 hyperscale stock in Alphabet report very good results,
 including 82% year-over-year growth in cloud computing revenues,
 and the stock fall deeply, relatively so, on that bit of good news.
 Can we expect the same thing from the other hyperscalers coming out later on this week?
 Absolutely. And I think what we're seeing here,
 and we certainly saw that last week as well,
 is sort of that more and more as the spenders, the hyperscalers, as they are announcing
 CapEx, they're almost getting punished for that announcement of CapEx.
 But at the same time, if they announced last CapEx,
 then what was expected by the street, I think that would be a problem too.
 So I think this is the time to recognize what's happened in the market.
 There's been that divergence in 2026.
 We've had a few. We've had that software versus hardware divergence.
 Now, I think it's the spenders versus the earners divergence,
 where obviously the more the spenders are spending,
 the more they're getting punished.
 I think we need to step back again.
 Like I said, if you look at the longer term picture,
 especially for some of the AI earners,
 obviously semiconductor companies like SOXX,
 which is the ISHA, semiconductor stickers,
 those are growing earnings at over 140%.
 I think that is the fundamental that we should focus on.
 There's a lot of concerns in the market,
 high real rates, leverage in the system, rising oil prices.
 Those are with us, hedging our portfolio is very, very important here.
 So look at AI, but look beyond AI as well.
 And this is where we're telling investors to look at
 other broad large cap parts of the market,
 which as I said earlier,
 the median company growing at 10%.
 And then look at liquid alternatives.
 Look at ways to find alpha in your portfolio
 without actually taking a lot of directional risk.
 And then lastly, great time to own fixed income
 given the repricing in yields that we've seen so far.
 All right, Gargi, Chaudry, BlackRock.
 Thank you very much for joining us. We appreciate it.
 Thank you.
 All right, a lot more to come here.
 A morning call, including the growing AI
 rift between employees and employers,
 a new survey looks under the hood there.
 Plus Sam Altman and Jensen Huang head to the hill
 at a critical time for the AI industry's future.
 And then later on, a major market milestone for SpaceX.
 And it's not a good one.
 A very busy hour still ahead when morning call returns
 after this commercial break.
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 Who knew when the internet was born
 that the internet was going to create
 a million-and-a-half jobs as Uber drivers?
 We are in the first or second inning of this revolution.
 This is a big paradigm shift
 both for the conduct of our policy and for our economies.
 I think the jobs will be greater prosperity,
 will be stronger.
 The question as one of my colleagues raised is timing.
 And we have to take that timing very seriously.
 All right, that was Fed Chairman.
 Kevin Warsh earlier this month on the AI revolution
 shaping the US employment picture.
 And ahead of Warsh and the Fed's next policy decision,
 indeed and you, Gov, are out with the new survey today
 exploring this new dynamic.
 Joining me now is Laura Ulrich, the Director of Economic Research
 in North America at the Indeed Hiring Lab.
 She's also a former senior regional economist
 with the Federal Reserve Bank of Richmond, Virginia.
 Laura, thank you so much for joining us this morning.
 Let's talk a little bit about what exactly prompted
 this study, this survey.
 And what exactly can we glean about just how prepared we are
 as a workforce for AI adoption and its impact?
 Well, thanks for having me this morning, Dom.
 As you can imagine, we get asked about the impact
 that AI is having on the job market every single day.
 And it's something that we're quite interested in,
 both as indeed the company, but also for myself as a labor economist.
 One of the things I think that stood out most from this survey
 was that 45% of employers are actively seeking AI native talent.
 And we define AI native as someone that's not only
 comfortable using AI across a number of workstreams,
 but also defaults to AI technology rather than legacy processes.
 But only 14% of workers consider themselves AI natives.
 If only 14% consider them AI natives are those 14%
 taking active measures to prepare themselves
 for the new workloads that they may be forced to do.
 And then by extension, how are, say, college students right now
 or recent college grads attempting to get those skill sets involved
 so that they can be more attractive to potential employers here?
 This is something I have thought so much about the last year
 because not only do I work it indeed as director of economic research,
 but I'm also the mom of a recent college grad.
 And so this is something we've talked a lot about at work and in my house.
 I think it's very important for people to seek out these AI-related skills.
 In today's labor market, what we found is that 70% of employers expect
 their employees now to be actively using AI.
 So using skills like Claude and chat GPT.
 But only about 35% even, or 35% even of Gen Z workers consider themselves
 really AI-fluent at this time.
 So this is a way to get ahead in the labor market.
 And it's also something that you can pretty easily teach yourself
 if you have not become AI-fluent at this point.
 How much has the AI story right now?
 Because it's very easy to say.
 And it's very safe to say we are in the early, early innings of this.
 Yet there's already been some disruption to the traditional labor force
 because of AI products and AI use.
 How much does a labor economist like yourself put into the early stages of this kind of disruption
 and how it could extrapolate into how industries evolve and change
 and how rapidly they do?
 Yeah, this is a great question.
 And I wish I had a really precise answer
 of what this is going to look like going for.
 What I can't tell you, though, is that a year ago when people were asking us,
 what are you seeing about AI jobs?
 The answer was not much.
 Very few jobs mentioned AI as a necessary skill.
 And we weren't really seeing AI pop up in job titles.
 That has now changed.
 And interestingly, a majority of the jobs that we now call AI touched
 are actually outside of tech.
 So these are jobs in fields like sales,
 human resources, marketing,
 where AI skills are becoming really important.
 I think one of the really interesting things that we're seeing
 is that there's been growth in tech.
 The growth around AI jobs is mostly in senior roles and mostly in higher income roles.
 But in other sectors, that's not necessarily what we're seeing.
 It's more of an even distribution kind of across the income levels.
 But I think what we are for sure seeing is that the landscape is changing
 extraordinarily rapidly.
 All right, Laura Ulrich at Indeed.
 Thank you very much for the conversation.
 It's a much complex and more complex one.
 I'm sure we'll talk about it later on down the line as well.
 We appreciate the time.
 Thank you.
 Now straight ahead on this show, holding on to some gains here,
 the historic chip, China IPO,
 and how US investors can get some exposure here.
 But first, we're watching shares of SpaceX under pressure again this morning.
 The stock has now erased more than $1.2 trillion with a T
 in market value from its all-time high of 225 bucks a share that hit back in June
 right after its IPO.
 Almost exactly the market cap of Tesla,
 which is also trading near a 52-week low as well.
 So SpaceX and Tesla very much are focused for investors right now.
 A morning call is back after this.
 Not every game's an all-timer.
 Sometimes you get a dud.
 But at Bet365, boredom is a thing of the past.
 Thanks to their early payout, there's always a reason to watch.
 And while they can't make games exciting,
 they can help fans get excited.
 Bet365, download the app and see what early payouts all about.
 Must be 19-year-old or Ontario-only.
 Please play responsibly.
 If you or someone you know has concerns about gambling,
 visit connectsontario.ca, terms of conditions apply.
 All right, welcome back to morning call.
 Big tech leaders, including open AI's Sam Altman and Nvidia's Jensen Huang
 are on their way to Washington, DC this week to meet with members of Congress
 and members of the Trump administration.
 An article out today on cmvc.com by Kate Rooney in Ashley Kapoo reports,
 quote, they're coming to alleviate policy makers' concerns
 about the rapidly advancing technology and help shape their views
 about what regulations should look like.
 Now, this visit lands during a particularly sensitive moment
 for AI development in the U.S.
 as a debate over whether to restrict Chinese open-weight AI model
 has ripped through Silicon Valley.
 CNBC's Ashley Kapoo is actually here with us
 in person for more on that story.
 Now, how exactly is this trip going to shape up?
 And what exactly are Sam Altman and Jensen Huang looking to accomplish
 and maybe by extension, what would they consider
 to be a successful trip to Washington, DC?
 Sure. So, Sam Altman is about to preview
 Open AI's upcoming suite of models.
 And if you'll remember, as our viewers, I'm sure, do
 from their last release, Open AI initially had to limit the rollout
 to a select group of trusted partners
 at the request of the U.S. government.
 The company was pretty explicit that they weren't happy about having to do that.
 So, if Open AI is able to preview these capabilities,
 avoid any major roadblocks this time around
 and maintain a path toward a broad release,
 they're going to be pretty happy with that outcome.
 Now, this is also, you mentioned, these new models.
 If you were going to take a look at them,
 we anticipate certain features are going to be part of them.
 What exactly do we know about these new models
 and what they could look like, what the functionalities could be,
 and how exactly does that go into the discussion with lawmakers about regulation?
 Sure. So, we know that Open AI is testing a more powerful model
 than GPT 5.6 sole, which is its most capable model on the market right now.
 And the reason that we know that is because Open AI disclosed,
 it was one of the instigators in the Hugging Face Cyberattack
 that it disclosed last week.
 So, lawmakers are certainly going to have lots of questions about this model,
 its cyber capabilities, and what the company is doing
 to make sure that no incidents like that happen again.
 How exactly do you think that Sam Altman
 when asked about this?
 Because I'm pretty sure it might be a topic of discussion.
 How will they explain the cyber security issues
 that go along with artificial intelligence,
 given the fact that we saw an AI model escape, so to speak, its confines,
 and then go attack is maybe the wrong word,
 but then target another company?
 Absolutely.
 We've heard from a source that Altman is very prepared
 to field questions about cybersecurity from lawmakers,
 makes a lot of sense if they have questions about this incident.
 Open AI has been warning for several months now
 that cyber capabilities are rapidly advancing,
 and it's advocating in favor of stronger protections here.
 It's saying it's still actively investigating the Hugging Face incident,
 and we'll expect to see more from them here on that in the future,
 but they're very much taking the approach
 that they want to institute more safeguards,
 and that's something we can expect lawmakers to press on this week.
 All right, CNBC's tech reporter, Ashley Kapoo,
 thank you very much and good luck with the covers this week.
 Thank you.
 All right, still on deck for the show,
 the three names outside of the AI trade worth watching this morning,
 our morning call crew is going to weigh in.
 The show continues after this commercial break.
 I'm Dominic Chouin from Oregon, Brennan,
 and welcome back to morning call.
 A look right now at US equity futures which remain mixed.
 The outperformance is coming as you can see from the Dow
 up and implied 97, 98 points,
 but the S&P is implied lower by roughly 2021 points,
 and the tech heavier Nasdaq trade off by nearly 300 at this point.
 Now, a mixed session in Asia with heavy selling pressure
 in Japan and South Korea on new worries around the chip trade.
 We'll have more on that story in just a moment.
 Europe, though, looking at some gains in early action so far,
 you can see there the Daxen Germany up about one half
 of 1% same story for the Kacken France,
 same story for the FTSE 100 in the UK.
 And we are watching the market cap battle between Nvidia and Apple.
 Apple yesterday reclaiming the title of the world's largest company.
 Those market caps right now as they stand,
 Apple at 4.971 trillion and then Nvidia at 4.705 trillion dollars.
 Now, shares are outperforming the Nasdaq 100 here indexed by a 23 percentage points in July
 on track for its largest monthly outperformance going all the way back to 2005.
 Apple's stealth rally is now accumulated a 17% gain on a month-to-date basis.
 We're checking some of this morning's latest headlines as well.
 AI anxiety and fears of new competition from China
 are ripping through the global chip trade,
 sending the South Korean Cosby to a three-month low in overnight trading.
 Chip names, stateside are adding to yesterday's losses as well as you can see there,
 Sandisk, ASML, Taiwan semi among some of the names
 being hard hit in the pre-market trade.
 Speaking on Air Force One, President Trump says he sees a, quote,
 good chance of an Iran deal amid the latest pause in military action,
 adding both sides are now talking through intermediary parties.
 The President's comments helping bring oil prices down to near $80 per barrel
 for US benchmark West Texas Intermediate.
 And then Johnson and Johnson says it's agreed to pay five and a half billion dollars
 to resolve litigation related to claims that its talc products caused cancer.
 Though the deal still needs to be signed off by lead plaintive firms,
 J&J maintains that talc does not cause cancer.
 And the FAA says that seats on more than 420 Boeing 737 Max Model Jets may require inspections
 to see if they were installed correctly over concerns they could cause injury to passengers
 and crew members during a possible emergency landing.
 Nearly 2,300 737 Max Jets are in service all around the world.
 And a federal judge is blocking Minnesota from enforcing a first-of-its-kind law
 banning prediction markets in that state like those run by polymarket and calcium.
 Of note here, CNBC and calcium have a commercial relationship that includes customer acquisition
 and a minority investment as well.
 Well, to the Federal Reserve now, Chairman Kevin Worshin Company kicking off their two-day
 policy setting meeting today, investors are grappling with whether Worshin will keep the central
 bank focused on containing inflation which could require rate hikes, or he President Trump's
 repeated calls to have rate cuts. On calcium, the majority of users largely expect the fed to
 maintain rates at the end of this month's meeting, as you can see there's 72 percent chance.
 A look at the bond market ahead of that meeting start, the 10 years holding right above the 4.6
 level as investors continue to monitor Iran war shocks and those continued worries about inflation,
 the 10-year note yield 4.618 percent, the two-year note yield 4.295 percent.
 For more, let's bring in Gilbert Garcia, owner and managing partner over at Garcia Hamilton
 and associates in Gilbert. Maybe the overriding question right now is what exactly do you expect
 from the fed this week on rates? Okay, thank you for having me. First of all,
 I don't expect any type of rate hike or anything of that nature. I think he's going to really
 wait to see how the task force really play out. I think he's going to utilize a task force to
 accomplish what he wants to accomplish, which is a reduction in the balance sheet. I think he's
 looking for changes in the communications and I really think he's going to bring back money
 supply as part of the framework for inflation. I think he's going to let the marketplace do the
 tightening for him and I think he's going to wait to the task force report back here at the end of
 the year. The markets will ultimately do what they do, but in the previous regime under Chairman
 J. Powell, we got a lot of maybe forward guidance and a lot of I guess context and some subtle hints
 around what policy could look like in certain different scenarios. It is not something that's
 many economists expect out of Kevin Wars and even Kevin Wars has kind of hinted the idea that maybe
 too much communication may not be a good thing. Where do you stand on what the markets want more?
 More communication or maybe less of it? Sure, a couple of things. I think the market probably
 wants more communication, but if you look at the data, it's very interesting. First of all,
 they haven't done a very good job with their forecast looking forward. The other thing is when you
 look at their the whole regime of bringing in a breeder dot plots, etc. The only thing it's done
 is increased volatility, not decreased volatility. So I think for the best thing for the market is to
 go back to sort of hunkering down, not telegraphing what they're thinking about monetary policy
 and letting the data speak for itself. I think they're going to look to improve the data,
 to really prevent so many large revisions. I think they're going to focus on the data to get more
 higher frequency data. And I think they're going to wait for those task force to come back. I think
 they're going to want to look at again, the balance sheet, how to run it off. I think the big
 king and yang will be how to run it off and whether to be in all treasuries or not. And I think they're
 going to see a whole different change of regime of communication. And I think it's well needed.
 And before we let you go, what do you think is going to be the key data point that is going to
 make the Fed feel as though they are moving in the right direction? We know PCE is something we
 watch constantly, but it's inflation, the key outlook here. My view is yes. And I think though
 what you're going to see is kind of a change for more higher frequency type like trim mean type
 PCE. I think the Fed is going to look at, you know, let's get away from the noise. Let's get away
 from the food and energy and all those spikes around the Iraq war. Excuse me, the Iran war.
 And I think you're going to see them look at what is the data saying? And let's try to get a better
 sense for what's happening real time in the real estate market. Because right now as we all know,
 the owner's equivalent rent is too much of a lag. And when you look at other real time data,
 we're already on a clear glide path to lower inflation and even towards that 2% target.
 All right. Gilbert Garcia on the outlook for rates. Thank you very much. We'll see you soon, sir.
 Thank you for having me. All right. We got a lot more to come here. A morning call,
 including more in the global chip crunch taking shape and growing threats. China may be posing to
 that trade. Morning call is back after this. All right. Welcome back to morning call. A
 news alert out of Japan. A 6.8 magnitude earthquake hitting the southern part of the main island.
 Officials now issuing a tsunami advisory as well. Japan's prime minister also taking to ex
 to urge residents to avoid the coastline saying officials are preparing for rescue operations
 if needed. The area is home to a Taiwan semi-production hub. A spokesperson saying it evacuated
 workers from the plant in the area as a precaution will keep an eye on that area of Japan following
 that big warning. Well, shares of CXMT are falling 4% in Shanghai today following yesterday's
 dazzling sizzling debut when they surge a whopping 466% making the memory chip maker China's
 most valuable listed company. The pullback coming is the global sell-off in chip stocks deepens in
 Asia on concerns about whether the AI spending boom is sustainable. SK Heinex, Samsung,
 and Japan's Adventist all down double digits as you can see in trading overnight. That's
 carrying over to the U.S. market where chip stocks in this pre-market with micron and video
 and others all seeing red moves today. Let's bring in Mori's pot founder and CEO of Tema ETFs which
 added CXMT to its newly minted disk memory ETF. So we have DISK from Tema, DRAM from Round Hill.
 So Mori, it's thank you for joining us this morning. Take us through what exactly was the
 onus for bringing disk DISK to market and why such a big deal getting into shares of CXMT.
 Don't like that so much for having me. So CXMT is the second largest IPO we've seen in China ever,
 and it's interesting because it's really the chip monopoly in China. It has donor position across
 DRAM but also has a growing business across HBM. But what's interesting is this listing happened
 all the star exchange in Shanghai which from most investors is not accessible at least and not
 until it's added to the connective Hong Kong. So today we are the only TF in the world that owns
 CXMT. We bought it on the morning of the IPO and frankly CXMT is a very fast growing player in
 the memory space across both DRAM and HBM. And as we saw with Kimi K3 model came out coming out
 earlier this month the memory demands or compute demands especially in China are accelerating
 really fast. And CXMT is at the core of that growth story. So this is the only way for investors
 to access CXMT which if you look at your market share is really the fourth or fifth largest
 player in the world. All right it is also as I can see here probably the fourth biggest waiting
 in your disk ETF just around 10 and a half percent waiting. You mentioned that many investors cannot
 get access to the Chinese mainland market. How exactly did you get access to the Chinese mainland
 market? Were you able to buy the shares directly or did you have to engage in a structured product
 to get exposure to that kind of stock? Great question. So we did it through swap through
 Morgan Stanley. It's the only swap position you have everything else we do at right equity.
 And once the stock gets added to the connect we'll convert it to the equity. But for now the only
 way to get exposure is through swap which is provided by Morgan Stanley. So yeah that's the only way
 that investors can get access and right now know the ETFs offer that access. Now one of the point
 Maurice before we let you go you also run a space exploration ETF the ticker NASA which you got
 a lot of fanfare for because you were one of the first companies to offer exposure through a special
 purpose vehicle to SpaceX shares as well. What exactly are you seeing about SpaceX shares right now
 with regard to flows to your fund and a space exploration something that you still want to be
 leaning into? We think the space economy remains early but we also understand that the space economy
 frankly got overexcited around the time the SpaceX IPO. So fundamentally we're very bullish on the
 SpaceX on the space story but frankly we realized that the space is still early and it's going to take
 time for these companies to mature and to re-prove the innovation that they're putting a lot of
 capital behind. Boy give us SpaceX in NASA we've also now done with that topic where with the
 first ETF to offer an appropriate exposure through and then the kind of material size through our
 photogenic CTF. So very selectively we'll offer exposure early just more really for some of the
 biggest most important and frankly most influential companies across the technology space.
 All right Maurice Pot with the latest there on memory and space exploration thank you very
 much sir we'll see you soon. All right thank you Maurice. All right we'll straight ahead on the
 show the morning call crew assembles team up what's shaping up to be another choppy trading day ahead
 the canary in the coal mine one crew member says could be lurking for investors that's coming up.
 Welcome back it's time for your call sheet where we look at the topics driving the trading day ahead
 the crew members assemble today are Ryan Dietrich of the Carson Group he's also a CMBC contributor
 Mark Smith of Wells Fargo and Jose Torres of Interactive Brokers gentleman thank you very much for being
 part of the morning call crew today let's start with our first topic which is going to be the chip
 trade a lot of focus today for the right reasons because it's been a volatile trade and overnight
 it's been a hammering for some of these names. Ryan I'm going to go to you for this one first
 the AI trade yes it's been powering the markets can it still do so and is this just a sign of things to
 come well first off good morning and thanks for me back Tom I mean listen if you had
 a said two months ago South Korea is down 11% yet Europe be green across the board in the U.S.
 futures flat I don't even want to believe you I mean don you don't you know this rotation is real
 I know lots of people have said it the realities of chip stocks keep you know quote unquote crashing
 sure that's going to put a lid on the S&P 500 in the market but let's not forget we gained 16%
 back in April and May virtually flat the last couple months so yeah of course we all want
 the market to always go up I think this kind of indigestion this choppiness it's a healthy
 side and eventually the chip trade and growth are going to come back but this is why we have a
 diversified portfolio because if you do you're not feeling nearly as bad right now Mark you're the
 portfolio manager per se of this tribunal that we've assembled from a PM's standpoint just how
 comfortable or uncomfortable are you with the chip trade. Hey Tom thanks for having me on again
 very comfortable with the chip trade because when you look at how these companies are performing
 they can't keep chips on the shelves and their earnings are proving a quarter after quarter so
 to my guess last point if you see any correction in chips I think you have to go ahead and dollar
 cost average in because this is a long story AI is proven in companies across the board that
 are going to be using this and chips are how you're going to get there so I stay in this trade
 and continue dollar cost average in Jose from an economist standpoint the chip trade is obviously a
 big part of not just the markets but the economic drivers I guess of what's going to happen in the
 future. How exactly then do you forecast for just what kind of an impact we could see given the chip
 buildouts the billions if not trillions that could be forecast for spending in that chip infrastructure
 in the coming 5 10 15 years. Well Dom measuring the economic data we saw yesterday as durable goods
 orders reflected buoyant appetites for ongoing AI capital expenditures as far as what's what's
 what it's done for the capital markets it's been very strong. We've been seeing lately however Dom
 is that folks are rotating into names in the Dow Jones industrial and the Russell 2000 those two
 baskets are up in the pre market despite chips being down significantly and I also think Dom
 that the magnificent seven has some space here to catch up to show some monetization trends show
 some progress on free cash flow and really revive the chip trade throughout this bull market we've
 seen periods of doubts about artificial intelligence valuations returns competition from China etc
 but all in all the trend is still intact the economic backdrop is still robust and I think the
 market goes higher just at right here we're entering a weaker seasonal period I think buying bonds
 is a good way to hedge and get some capital gains in the months to come. All right a lot of people
 talking about that bond trade right now these days let's talk about our second topic which is the
 kind of early part of this busy busy week of earning season 30 the S&P 500 is going to be reporting
 including Mark today the likes of Coca Cola United parcel service and Boeing amongst others big
 bell weather type names what exactly is on your radar with regard to earnings specifically those
 non AI names. Yeah Dom listen it's a great question I think that if you look at what's happened
 to it's a very bifurcated market you're seeing that when I talk to my clients that there's you know
 if you're the risk on trade is AI and tech and everything else is kind of like yeah we'll wait
 to see what that looks to be let's say cash I would say that you've got to really look to
 diversification as you guess you know said earlier tech is obviously leading the way this year
 and so I continue to stay in that but the the companies that you just mentioned they really
 are driving investors to want to dive into consumer staples consumer discretionary so
 I put a pause on that for now and hold any positions you currently ask. All right Ryan what do we
 think in terms of those earnings reports coming up what's going to stand out to you which one of
 you watching the most. Yeah building on a mark said there I mean those that we all know this
 has been incredible right 86% of companies have beaten 80% on revenue. I think what's fascinating
 those how the financial started things off with historic numbers right we saw that and how's
 the consumer I mean that's the big thing how strong as a consumer we're going to get a lot more
 data on that coming up and most of the data that we see still says the consumer Dom is in pretty
 good shape not saying things are perfect but they're pretty solid so it's been a good start to
 earning season and I bet it continues you know the next several weeks here. All right and let's
 move on to our third topic today which is going to be the FOMC big meeting here it could be live it
 might not be Jose I'll go to you for this one from an economist take what exactly are you expecting
 baseline from the Fed and Kevin Warsh and what exactly could maybe throw markets a little bit more
 off-kilter. You know Dom I think here markets are going to digest this pretty well when we look at
 what's happening with inflation despite this recent spike in oil that we've seen we're actually
 seeing here our economist team believes that the July CPI is going to be around 3.3% that would
 be down from 4.2% in May so despite this brief uptick and energy prices we still have the CPI
 disinflation trend in tech on top of that Dom the core CPI is at 2.5% in July based on my forecast so
 that really shows that housing disinflation is really bringing down overall costs I'm expecting
 that to lead Fed Chair Warsh into more of a dovish tilt in the periods to come I think we're going
 to get that pause however I do think that September there's a good chance for a lift although if oil
 can stay below 80 Dom we're going to see the CPI back in a two handle by December and I think
 that's a great story for rates and for the cyclical trade. All right and Mark you mentioned bonds
 as a diversifier specific parts of the bond market that you like given the FOMC in this
 right outlook. Yeah you guys say you know short when I talk to clients I'm telling you you know
 I ran I ran I ran it on everyone's mind and if this work continues you're going to continue
 to see inflation the FOMC is going to have to raise rates unfortunately no matter what the executive
 branch thinks and so I stay short. All right and then Ryan quick word to you favorite part of the
 market yeah split the middle here I don't think we don't think the Fed is going to do anything
 we fact think they're on probably pause the rest of this year I mean favorite part of the market
 listen I still need equities I still think you want to have some growth on once I want to have some
 you know some value on the other and we really like financials and industrials. All right Ryan
 Mark Jose thank you guys very much for being part of the crew this morning we appreciate it
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