Deep Dive
Shownotes Transcript
A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities.
♪♪
On WhatsApp, no one can see or hear your personal messages, whether it's a voice call, message, or sending a password. To WhatsApp, it's all just this. So whether you're sharing the streaming password in the family chat or trading those late-night voice messages that could basically become a podcast, your personal messages stay between you, your friends, and your family. No one else. Not even us. WhatsApp. Message privately.
I'm Frank Holland and you're listening to CNBC's Worldwide Exchange. Our show is live weekdays at 5 a.m. Eastern. Listen in.
Elon Musk ramping up his attacks on the Republican big beautiful bill as the president he fires back at a familiar target. This is investors they continue to digest that weaker than expected private payrolls report and a grim outlook from the Fed. Futures this morning they're kind of fighting for gains plus we're heading back to one of the wealthiest investment conferences in the entire world at CNBC exclusive with Robert Smith of Vista Equity Partners. It's Thursday June the 5th 2025.
And this is Worldwide Exchange on CNBC and streaming on CNBC+.
And good morning. Thanks so much for being here with us. I am Frank Collins. Let's get you ready for the trading day ahead. We begin with the U.S. markets, the S&P and the Nasdaq, both of them on three-day win streaks as investors weigh a softer than expected ADP private payrolls report and the president calling for J-PAL and the Fed to cut rates again. I think it's important to throw in the again there. Take a look. This morning, you're seeing the action in the green across the board. Bit of a muted start, though. All three indices up right around a quarter of a percent right now. Dow looks like it would open about 80 points higher. We'll be right back.
We're going to take a look at the S&P 500 pre-market leaders and laggards. Taking a look at the leaders' first match group right here at the top of the list. Those shares up nearly 2%. Zoitis, a pet health care company, up just about 2% as well. Franklin Resources, Waste Management, Centene, running out your best performers. Then we have the laggards, the other side of the coin, right here at the top of the list of the worst performers. You have Aptiv pulling back about 2.5%, followed by Fair Isaac, Brown Foreman, Huntington Ingalls, and down here, Tesla, Elon Musk Company pulling back nearly 1.5%.
Again, Elon Musk coming out with some very critical remarks about the big, beautiful bill. We're going to hit on that in just a bit.
We're going to check the bond market right now. Yields with a pretty significant, actually, downside move on the back of that ADP private payrolls report and the latest Fed page book highlighting rising prices, slowing hiring, and declining growth tied to rising levels of economic and policy uncertainty. Take a look at yields. The benchmark pulling back just about 10 basis points right now at 4.34. Down here in the long bond at 4.86. Similar downside move. Also a similar downside move for the two-year.
Also looking at currency this morning, the dollar falling just about a half a percent yesterday. We continue to see weakness in the dollar right now. You're seeing week to date the dollar is down about a half a percent. This morning moving very fractionally higher and also looking at gold. Gold up more than a half a percent yesterday. On pace for a winning week, about a 2% gain for the week. Actually a 3.5% gain for the week. I stand corrected. Currency traders tell me we're seeing a lot of money move from the U.S. dollar into gold and other foreign currencies. Again, gold up just about 3.5% this week.
All right, that's your setup now. We want to turn our attention over to Europe. Investors there bracing for what could be another major market event. Our Karen Cho is in London with much more. Karen, good morning.
Good morning, Frank. Yes, it is ECB day today as we focus on monetary policy. But this whole diversification trade, rest of the world still working extremely well for European stock markets, in particular the DAX that has traded at a fresh record high today. So as we count down to the ECB decision, already drivers in place in Germany. We're talking yesterday about big corporate tax breaks that the government's trying to pass.
in addition to the big fiscal defence packages. So that market travelling higher, up another third of a percent at fresh record intraday. And you can see other major markets also in the green today. But when it comes to monetary policy, the European Central Bank is widely expected to cut
rates for an eighth time this cycle today, bringing its deposit rate down to 2%. This after May's inflation print for the Eurozone dropped below the ECB's 2% target, came through at 1.9%. Services still a little bit sticky on the inflation print, but that overall headline rate
enough that it could move the central bank today. But after we get a move today, what comes next, Frank? It seems as though a summer pause could be in the making as the central bank eyes all those fiscal packages down the track and, of course, the trade uncertainty still.
All right. Our Karen Cho live in London. Karen, thank you very much. Turn our attention now to Washington and Elon Musk keeping the pressure on President Trump's big, beautiful spending bill after calling it pork filled and disgusting. Now asking his followers to help kill that bill entirely. NBC's Chris Pallone joins us now from Washington with much, much more in this story. Chris, good morning.
Yeah, Frank, good morning to you. You're right. Elon Musk, the billionaire supporter of President Trump, continues to put pressure on Trump and Republicans to kill this spending and tax cutting bill, the president's signature move that he wants to
have on his desk by July 4th. Yesterday, Musk again posting several tweets on his social media platform X, urging people to call their senators, call their congressmen, saying bankrupting America is not okay, kill the bill. Now it's believed that Musk is taking offense at the fact that the Congressional Budget Office projects that this bill will increase the federal deficit by about $2.4 trillion over 10 years, though
Republican insiders also say they believe that Musk is upset that the bill does not include any incentives for people to buy electric cars. Of course, he's the CEO of Tesla, one of the biggest electric car makers in the United States. And so this is continuing. Republicans seem to be
dismissing Musk's concerns, saying that he will not kill that bill, that they've been working on it too long for it to be killed. But it's increasingly clear that there is a rift developing between these budget hawks and the White House. Chris, speaking of a rift, there's a new report out saying that there may be a growing rift between the president and Elon Musk. You mentioned Elon Musk as his billionaire supporter, supported him on the campaign trail, even joined the administration, at least on a part-time basis for Doge. What's going on there?
Yeah, and so the Wall Street Journal and NBC News both reporting that the president is not happy with this turn. You know, Musk taking aim directly in a very public setting at the president. And it's interesting to note that the president has not publicly responded. Now, that all could change today. He is going to be in front of cameras, in front of reporters for the first time since Friday.
as he welcomes the chancellor of Germany to the White House and to the Oval Office today. So, of course, this will be a topic that reporters want to discuss with the president.
Also, there's a policy from the president's first administration that he is now reinstituting a travel ban for certain countries. What's the very latest on that? Yeah, that's right. So overnight, the president posted a video to X basically saying that he's instituting a travel ban for foreign nationals from about a dozen countries, mostly in Africa and the Middle East, places like Haiti and Afghanistan. It also affects another six countries with a more limited population.
restrictions on their travel. So a total of about 18 countries in this new travel ban. You'll remember the president did this for six mostly Muslim countries back in 2017. It faced many, many legal challenges over the course of about a year. But after a year, the Supreme Court ultimately ruled that the president could ban foreign nationals from entering the U.S. All right. Chris Pallone, live in D.C. Chris, great to see you. Thank you very much.
All right, now time for a checklist of this morning's top stories. Our Silvana Henao is here with those. Silvana, good morning. Hey, Frank. Good morning to you. Well, CrowdStrike CEO George Kurtz making his first public comments over a company disclosure the Department of Justice and the SEC are investigating accounting practices at the cybersecurity giant, including a $32 million deal with a company called Karas SoftTech. Now, Kurtz speaking with Jim Cramer on Mad Money last night. Listen in.
The government takes time to work through things, but as I said, Jim, someone asks a question, we're going to cooperate. It's an inquiry and we'll give them the answers they need and we'll go from there. But like I said, we stand by the accounting of those transactions.
And in the last 24 hours, Bank of America, Canaccord, Evercore and more have downgraded shares of CrowdStrike. And we are seeing shares right now just fractionally higher in the pre-market. All right. Kimberly-Clark is reportedly closing in on a sale of its Kleenex and tissue business outside
of North America for around three and a half billion dollars. According to the Wall Street Journal, Clark is looking to Brazil-based Suzano to take over the division with a deal likely as soon as today. Now, the Senate confirming Federal Reserve Governor Michelle Bowman to be the central bank's next top regulator. Bowman is expected to push for an agenda aimed at
easing rules for big banks. Trump nominated Bowman to the position back in March, and she's served as a Fed governor since 2018. And the White House is putting a stop to new foreign student enrollment at Harvard. In a late-night proclamation, President Trump says he's suspending the school from participating in the student visa program for at least six months.
citing national security concerns. Now, Harvard calls the move a violation of its First Amendment rights. The proclamation follows Trump's move yesterday to strip Columbia of its university accreditation. Frank. All right, Sabana, thank you very much. We'll see you just a bit later in the show.
All right, turn our attention now back to the markets, the U.S. markets in particular. They've come almost full circle since President Trump's sweeping tariffs on April the 2nd caused the S&P to drop nearly 20 percent into a bear market. Well, now the index, it's up about 19.8 percent since the closing low back on April the 8th. And that's despite some weak economic data and continued headlines over both trade and over tariffs.
Joining me now is Storm Uru, head of the global innovation team and co-lead fund manager at Lion Trust Asset Management, a firm with $30 billion in assets under management and advisement. Storm, good morning.
Good morning, Frank. Great to be back on the show. All right. So we're pointing out some of the headwinds right now with the Fed page book talking about rising prices, slowing hiring. Inflation continues to be a concern for a lot of people. And right now you say you're actually you're looking for opportunities in consumer facing platforms, companies like a Shopify or a lemonade. Do you have confidence the consumer can get through all these headwinds? I mean, what makes you so confident in these specifically consumer facing platforms as opposed to companies that depend on business spend?
Yeah, you're exactly right. And because of the volatility that you framed very nicely at the beginning of the show, that we've experienced in the markets in the last three months, it's really produced opportunities in companies that have unified software platforms that are facing the consumer that are AI first. And what I mean by that is companies that have great distribution footprints, they have very locked in consumers because they deliver great products.
And then they're able to automate to reduce their cost curves going forward. So the market has moved into companies like Netflix, Spotify, Uber. These are well-known consumer-facing platforms that have delivered these types of outcomes for investors. But there is a number of companies underneath that with a lot of market capitalization, like Affirm,
like Shopify, like Lemonade, that are delivering exactly the same types of execution in the market but are not being rewarded in the market. But, Storm, you've got to explain the thesis. I mean, while AI may help them be more efficient or maybe roll out new products, what about a consumer that doesn't have the money to spend if we're talking about rising prices through inflation or slowing hiring? I mean, if people don't have jobs or they don't feel confident about their jobs, they don't spend. Yeah.
Yeah, so what we learned during COVID is that if you are focused on driving value for customers by driving the prices down, then what you have is a more difficult economy is that customers or consumers move towards those products where they're innovating and driving prices lower. So that's where companies like Affirm, like Lemonade really benefit because they're focused on driving value for customers and that's by driving prices lower.
So if it is a more difficult economy going forward, then we expect customers to move to these platforms because they just deliver a better product. Later in the show, we're going to go to one of the wealthiest investment conferences in the world. A big part of the conversations there is about alternatives, whether it's private equity or private credit. You're really liking two alternative asset managers that if they bounced from their April 8th lows, but they're still about 30 percent from their 52 week highs. That's Apollo and Blackstone. What's the catalyst? What do you think gets them back to those all time highs?
Yeah, so the long-term structural case of these companies is really exceptional. We need significant infrastructure build-out, both in compute and the data centre, also in transportation as we electrify, and also in power supply. So we know over the next 10 years a significant amount of capital needs to be spent to build out these assets.
Apollo and Blackstone are going to be the companies that enable this build-out. What we've had is we've had a significant pullback in the last three months from a stock price perspective, which has given us the ability to make investments in these particular companies. And then what we know is that capital markets over the next six, 12 months will eventually open up. Obviously, the trade policy and physical policy uncertainty has slowed that opening up.
But as we go through into the second half of this year and into the following year, we expect these companies to be able to exit a number of investments they've made in the last decade as well. Yeah, but in all fairness, if the capital markets open up, the IPOs start flowing, how does that help these alternative asset managers? A big part of their, well, not a big, but a growing part of their business is private credit. When things start to loosen up and there's more liquidity, doesn't that hurt one revenue stream for them? And also everything you mentioned is already publicly known. Why isn't that already priced into the stocks?
So these are very volatile stocks because of the types of investments that they make. But these, over the last 10 years, have compounded shareholder returns at about 20% per year. They provide services into the financial service industry, which banks can no longer do, so due to regulation. And so they are benefiting from very strong structural growth over the next 10 years because these very large infrastructure requirements.
we use market volatility to build positions in these types of companies where we think that short-term market and efficiency exists but over longer term these companies will get rewarded for what they're able to obtain
Stormer Ruh, always good to see you. Thank you very much. All right, we've got a lot more to come here on Worldwide Exchange, including much more on Elon Musk and his budget bill attacks and what's surging debt, what that could mean for your portfolio. Plus, could we see a small-back comeback underway? We're going to ask Goldman Sachs top sector strategist. And then later, we're live from the Super Return Conference in Berlin, a Worldwide Exchange exclusive with Vista Equity partners. Robert Smith, we have a very busy hour still ahead when Worldwide Exchange returns.
Stripe is the go-to choice for AI companies, from early-stage startups to scaled enterprises. 78% of the leading AI companies use Stripe to go to market quickly and scale globally. That includes pioneers like NVIDIA, OpenAI, and Perplexity. Stripe has developed cutting-edge tools to improve everything from fraud detection to checkout optimization. Whether you're aiming for incremental gains or planning for enterprise transformation, see how Stripe can help at stripe.com.
Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson Report.
Ryan Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same premium wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you to Mint Mobile today. I'm
I'm told it's super easy to do at mintmobile.com slash switch. Upfront payment of $45 for three-month plan equivalent to $15 per month required. Intro rate first three months only, then full price plan options available. Taxes and fees extra. See full terms at mintmobile.com.
All right, welcome back to Worldwide Exchange. We're going to turn back to one of our top stories this morning, the relentless campaign by Elon Musk against President Trump's big, beautiful bill. The frequency of the attacks, critiques and calls to action actually escalating over the past 24 hours.
Elon Musk is saying, and this is him, that it's debt slavery. The bill is debt slavery and one that will bankrupt America. But according to a new report from one investment firm, there is much, much more to America's indebted future than just the headline price tag. Joining me now is Julia Herman, global market strategist at New York Life Investments. Julia, good morning. Good to see you.
Good morning. Thank you for having me. All right. So you say there's much more here. Something you're focused on is a term I actually haven't heard before, debt sustainability and how that should factor into allocation. So, you know, the U.S. has the most robust government debt situation in the entire world. How sustainable is it?
Well, frankly, in the U.S., debt sustainability has become almost this mythical creature where we all know the risks, we've all heard the cautionary tales, and yet there have been no systemic sustained consequences for the U.S. running higher and higher debt levels and the efficiency of that spending declining over time. I think some of this is quite valid, primarily because we haven't seen a developed economy default on its debt since the Second World War.
But even if outright external default risk isn't the key risk around debt sustainability for the U.S., I think that tells investors not to ignore it, as many have been, but that it's more in the journey rather than the destination. And my research has been focusing on what investors can do in that interim debt management point between today and any potential sort of crisis point.
We have potential crisis points. So just to be clear, our debt is in U.S. dollars. We can simply print the dollars so we can always pay the debt. But you're saying it will reduce potentially confidence in U.S. debt. So one other theme that you've been looking at is also protection and promotion of debt demand. Something that a lot of people are talking about is, again, this big, beautiful bill. How does the big, beautiful bill potentially impact our debt demand?
Well, ultimately, that's going to be up for the Senate and the bond market to decide. And it is very clear that adding in this pace to our deficits is not considered a step toward more sustainable debt. What I think is most important to understand about the U.S. debt load is exactly what you said, that we can always, in theory, print more dollars to service that debt. So it's not about default risk.
We do, however, have to address the very near-term Achilles heel, if you will, in the U.S., which is our interest payments. Now the U.S. is spending more on interest payments than on defense. It's beginning to crowd out discretionary spending. And I don't think making adjustments there needs to be a traumatic event for the markets. I think it can be signaled with a very gradual glide path on deficit spending.
All right. So one of the issues that you're talking about here is our interest expense. It continues to grow. And obviously, if yields go higher, that increases the interest expense. Another issue that seems to be playing out right now is, I guess, a shift away from U.S. exceptionalism, certainly in the currency market. But is that something that we may see also in the debt market? Is that a real concern, at least in the near term for the U.S.? Obviously, long term, nobody knows. But in the near term, are we going to see people go to gilts or German boons?
Unfortunately, there's really no alternative at scale for U.S. assets. And whether that's unfortunate or not, I guess, depends on where you sit as an investor. But let's think about Europe, for example, as an alternative to the U.S. when it comes to debt assets or even equities or other asset classes. Europe does not have integrated capital markets. And so that is the big hindrance to Europe replacing the U.S. or serving even as a viable alternative.
We could also look further afield to China, which theoretically does have the scale, but it also has a closed capital account. And we do not see any willingness for China to open up that capital account and to integrate and liberalize its capital markets. So in the meantime, and that might be the next 50 years, the U.S. is the only integrated at scale deep and liquid capital market to play in.
You know, Julia, I know a lot of your research, at least in this instance, is really focused on some of the issues. But I do have to ask, is debt, U.S. debt, attractive right now, at least at the short term? I mean, rates are pretty elevated. They pulled back after the ADP report. But you look at the two-year, just a day or two ago, it was up about 4%. I mean, isn't that relatively attractive for investors?
I think that the overall theme that matters most for me and my team right now is the overall volatility across the curve. It means that duration is not our preferred place to take risk right now and on corporate credit and credit more broadly we are staying slightly shorter duration. In our view that's a potential solve for two issues. Number one the yield volatility and number two
any potential credit quality that concerns that might come up in the corporate market as the economy slows per expectations. All right. We'll have to keep that in mind. I believe a three month and a six month auction are coming up in a few days. We'll have to watch those and see if investors around the world are looking at that short term debt as well. Julia Herman, great to see you. Thank you very much. Still on deck here at Worldwide Exchange. We've got your big money movers and another tariff hit taking down shares of this company. We're going to reveal your mystery chart right after the break. Stay with us.
Next level pet people will do anything for their dogs. That means treating them with next level protection from parasites with Next Guard Plus, a Foxel Honor Moxidectin and parental chewable tablets. Next Guard Plus chews provide one and done monthly protection against fleas, ticks, heartworm disease, roundworms and hookworms, all in a tasty beef flavored chew. Used with caution in dogs with a history of seizures or neurologic disorders. Dogs should be tested for existing heartworm infection prior to starting a preventive.
Ask your vet about NexGuard Plus Choose.
Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson report.
All right, welcome back to Worldwide Exchange. Time now for your big money movers. We're going to start off with shares of Five Below reporting better than expected. Q1 results, the same store sales, they rose more than 7%. You can see shares are up just about 5.5%. The Philadelphia-based discount retailer also guiding a second quarter revenue above estimates. Five Below's new CEO saying a renewed focus on value is working as shoppers are keeping a tight budget. I actually saw the CEO a while ago. He said he's going to come on the show, so we might have him on soon.
All right, shares of MongoDB are surging after the software company's first quarter results beat forecast as new customer additions hit a six-year high. MongoDB is also raising its earnings and revenue guidance for the year. You can see right now shares are up just about 15%. And PBH, it's falling. Even as the clothing company reported better than expected first quarter numbers,
Shares down nearly 9 percent. The owner of Calvin Klein and Tommy Hilfiger is cutting his full year profit outlook as it faces an estimated 65 million dollar hit from tariffs in its most recent annual report. PVH says most of its products are imported into the countries where they are sold. Again, shares of PVH fall in just about 9 percent right now.
Coming up eight years later, the wait is over for Nintendo's latest, greatest, and most expensive product ever. Let's not really stop in the Mario faithful from waiting in line for a chance to be the first to take one home. I got to say, it's no Game Boy. I still got my Game Boy, actually. It's no Game Boy.
But first, watching the ITA, the iShares Aerospace and Defense ETF hitting an all-time high and trying for a nine-session win streak today. The last nine-session win streak all the way back in 2019. The ETF's up just about 24% year-to-date, led by Halmet Aerospace, GE Aerospace, and much more, all hitting 52-week highs. We're back right after this. Stay with us.
Just given the outperformance of my US assets over the last five or ten years, maybe there's a chance to rebalance. A lot of people on those marginal decisions are saying maybe I should be looking at Europe and Asia now both as a diversifier, a rebalancer, and just recognizing that those valuations have gotten out of whack. So we think it's a good investing environment outside of the US.
So that was 6th Street co-CIO Julian Salisbury on Worldwide Exchange yesterday at this year's Super Return in Berlin, talking investment opportunities outside the United States. Salisbury just one of many at that event, talking about expanding European investments over the United States. Welcome back to Worldwide Exchange. I'm Frank Collin. Coming up, we're going to have much more on the opportunity in Europe and much, much more from Super Return, including an exclusive conversation with Vista Equity Partners CEO Robert Smith. You don't want to miss that one. It's going to be a good one.
But first, we're going to begin with the U.S. markets. The S&P and the Nasdaq on a three-day win streak as investors. The way a softer than expected ADP jobs report and the president calling for J-PAL and the Fed to cut rates. Take a look at futures right now. You can see we're off of our highs of earlier, but still in the green across the board. The Dow looks like it would open about 65 points higher. Also looking at small cap futures this morning. Small caps higher in eight out of the last nine weeks. We're going to be talking small and mid-cap stocks.
In just a moment, right now in the futures, though, the Russell 2000 futures up kind of fractionally right now. Take a quick look at NASDAQ 100 gainers in the pre-market. Take a look at those stocks. You see ASML right there at the top of the list, up over 1.5%, followed by Micron on Semiconductor. Marvell theme there, all chip stocks. And then the NASDAQ 100 laggards as well. Taking a look at those. Tesla right there at the top of the list, pulling back about 2%. We're just talking about Elon Musk.
And some of this tension with the president, followed by Palantir. Palantir CEO Alex Karp is going to be on our air later today on Squawk on the Street. Axon Enterprise and Mercado Libre running out your worst performers in the pre-market. Also checking the bond market with yields, making a bit of a downside move on the back of that ADP private payrolls report and a grim outlook from the Fed's latest beige book. The benchmark right now at 4.34, pulling back right around 10 basis points. Also looking at tech more broadly.
The tech sector is the leader week to date with chip names seeing some big upside moves. We're actually looking at some of those same names just a bit ago in the pre-market. Look at Microchip Tech. Those shares up over 11% week to date. Supermicro up just about 10%. We're going to be talking much, much more about tech again with Robert Smith of Visti Equity Partners coming up just a bit later in the show.
All right, moving on to the markets. As we mentioned, small caps, they've been on a bit of a run with the rest of the broader market, up eight out of the past nine weeks and up nearly 20% since the closing low in April, kind of tracking what the S&P is doing since that time as well. But the Russell 2000 is still in the red for the year in the space. It continues to frustrate some investors who've been really hoping for a major breakout. A lot of people have been calling for one. If you go back a few years, the index is trading right around the same level it was all the way back at the start of 2021.
For much more on this, let's talk about small and mid-caps with Greg Torto, Portfolio Manager at Goldman Sachs Asset Management. Greg, it's great to have you back on the show. Thanks for having me. All right, so we're just showing some of the moves and some of the trends up eight out of the last nine weeks. Big bounce off the April lows, very similar to the S&P, up about 20% over that time. A lot of people, like you, you're one of these people that talk about the valuation of small caps. They traded a discount about 16 times forward earnings compared to the S&P at about 21 times. At what point did we start talking about the discount and start saying, maybe this is a value trap?
I don't think it's a value trap. What I think it's been has been a complete sum of all fears for everything. The economy, tariffs, everything that you worry about have really found a home in small caps. And I think that as you've seen investors put their money elsewhere, it's been much harder for the overall asset class to break out. We're starting to see signs of
that we are much closer to that. Money's starting to flow back in in trickles, but a little bit better than before. And the technicians are starting to call for a little bit more of a sustained move from here. All right. We're talking a lot about agentic AI. In fact, we're going to talk about that probably with Robert Smith coming up. We've heard some people come on our show and say agentic AI is going to transform small caps, going to make them more competitive with a lot of their larger rivals.
Is there one sector in small caps where you see that potentially playing out in the near term? Yeah, I think that there's a lot of companies that need to use agentic to kind of make sure that they can get their business
business into their customers. And if you look at some of the stuff in the fintech world, some of the companies that work in the banks, Alchemy Technologies is one we own in our ETF that uses agentic AI to make sure that their software is being used effectively for the things in the banking world that needs to happen. All right, let's get some of your picks. You got some interesting ones. Now, the ones that make me kind of scratch my head are the consumer-facing small caps, things like Ali's Bargain Bin and also Shake Shack.
You know, obviously, you know, Shake Shack's not super expensive. Neither is Ali's Bargain Bin in the name. It's not very expensive. But if we see a weakening consumer, aren't you concerned that
customers and consumers are going to go back to things that they just know a little bit better and also can buy at scale. Why would you go to Ollie's Bargain Man when you go to Walmart and get a deal? Why go to Shake Shack when McDonald's has the $5 value meal? Well, I think that, you know, when you look at Ollie's and you showed Five Below, which had a good quarter as well last night, you're starting to see some of the trends accelerate. You know, they offer something to their customers that you probably can't get at Walmart. And I think that in many cases,
They're closer to the customer than that Walmart Superstore. When it comes to Shake Shack, with menu innovation, with loyalty, I think you are having a much more competitive burger environment than McDonald's. Now, McDonald's can out-innovate and they can out-advertise, but I think Shake Shack has that loyalty edge with customers who really feel like they have a great experience when they go there.
All right. One other one you had on your list here is Kratos Defense and Security Solutions. We were just talking about the ITA hitting an all-time high. Kratos is in the defense space. But I'm just curious. We've had another smaller cap company, Parsons, on our show in the defense space as well. As we see defense spending ramping up over in Europe, potentially pulling back here in the U.S. as we look to cut the budget, how does that work for these small cap companies?
I think that's why you need to really dig into some of these small caps, because you can go into the areas where there is spending increase. And Kratos is on the information side, on the drone side, where you're starting to see some of that money being spent. Dollars can go a lot further, as we've seen what's going on in Ukraine. Dollars spent in drones can go a lot faster than when you're spending on the F-35. All right, Greg Torto, you've got to come back. We've got to keep this small caps conversation going. Just come back into your right.
I like to give you a hard time. You're always a good sport. Greg, great to see you. Thank you very much. All right. Coming up here, Worldwide Exchange surpassing expectations. Circle sending some strong signals for crypto and the IPO market as it goes public. We're back with this story and much more right after this break. Stay with us. And welcome back to Worldwide Exchange. Get a check on some of this morning's top stories, including some good news for the IPO market. Silvana now is back with that. Much, much more. Silvana.
Hey, Frank, good morning. Yes, so shares of Circle will begin trading later today after pricing its IPO about the expected range. Now, the issue of one of the world's biggest stable coins pricing shares at $31 each, giving the company a total market value of $3.
Now, shares will trade on the New York Stock Exchange under the symbol CRCL. Meanwhile, Procter & Gamble announcing it will cut 7,000 non-manufacturing jobs over the next two years. That is roughly 15% of its headcount. Now, the company also saying it plans to reduce its product portfolio, including exiting some categories and divesting some brands. We're seeing shares are fractionally higher in the pre-market.
All right, Apple losing its emergency bid to pause an overhaul of its app store in its ongoing legal battle with Epic Games. The ruling by a panel of judges on court of appeals for the Ninth Circuit means that Apple can no longer charge a commission on payment links inside its apps. It is also no longer able to tell developers how the links should look. An Apple spokesperson says the company is...
is disappointed with the decision and will continue the appeals process. We're seeing shares of Apple just fractionally higher in the pre-market. And Nintendo Switch 2 officially going on sale around the world today. Now, this is video of the doors at the Nintendo store in New York City, Frank, opening last night for fans trying to get their hands on the gaming system. So the Switch 2 is expected to be in short supply, and that's due to pent-up demand for the device.
Pre-orders were initially slated for April 9th, but were delayed as the company tried to assess the impact of President Trump's tariffs. And Frank, all right, if you are trying to get one, it's going to cost you $449, making it Nintendo's most expensive console ever. And if you get the bundle with the Mario Kart game, that's $499. You're pretty, are you a gamer? You're pretty excited about this. I mean, you got everything. You have Mario Kart. I love playing Switch with him. I love playing the Switch with him. And the Mario Kart game is a lot of fun.
Listen, I wasn't joking earlier. I was in my garage this weekend. I found my old Game Boy, and it still works. I was playing Tetris. Way better than anything Nintendo Switch could ever be. That's pretty awesome. Game Boy all the time. That's pretty awesome. All right, Silvana, you enjoy your gaming, Mario Kart and everything else. You've got to give me some recommendations, and thank you very much. All right, coming up here on World Wide Exchange, Europe in Vogue. A look at where investors are parking their money as U.S. exceptionalism continues to face some growing questions. We're going to be right back after this. Stay with us.
All right, welcome back to Worldwide Exchange. Turning back to the markets in this year's Super Return International in Berlin, featuring nearly 2,000 attendees with more than $50 trillion in assets, are Leslie Pickers there in Berlin, and she's joined by the CEO of Vista Equity Partners for a CNBC exclusive. Leslie, good morning.
Frank, good morning to you. And Robert Smith, thank you so much for being here. Good to see you, Leslie. Thank you for inviting me. Very excited for this conversation. I want to start on AI because it's clearly transforming everything about software. And given what you've seen so far, do you see this as essentially a technology that's creating a productivity revolution or some sort of valuation bumping?
So it is, again, a new general purpose technology that has massive implications across the entire global economy. And I'm not understating the implications of that. What we are saying, of course, in the way we operate, we operate in 180 countries over 70 different industries is.
we have built now a factory to convert our enterprise software companies to become Agenda, which is quite new, quite novel. It's very similar to what we did in going from on-prem to cloud and building a factory in that construct. And far as I know, we've done more of those than anyone else. Now we're now at the stage where we're now able to convert them from these cloud
cloud-based companies to a gentle. The implications are massive in the productivity. So our average software company delivers about a 625% ROI to the companies that they serve and their customers. This actually is exponential to that in terms of what it can deliver. Multiples in some cases exponential. So we're seeing massive opportunity in that construct. Enterprise software I think will end up in three states.
One state is what I call a gentest, and our factory will convert those. Another state, what was the rule of 40 now becomes the rule of 70. 70 is the new 40. You can use this new technology to improve the efficiency of product development, go-to-market, customer support, all of the aspects to run a company so they become more profitable, more efficient, and can grow faster.
So those are two elements. And the third state is if you haven't prepared these businesses well, you may not have a right to exist in the future. So that's the nature of how enterprise software is being affected by artificial intelligence. - What does that mean for someone's day-to-day life? If you don't have an agent now,
Will you have one pretty soon? If you don't have one pretty soon, will you be out of a job? I mean, how do you see this changing the workforce? So at a high level, there are about one billion knowledge workers on the planet. These knowledge workers have done a very effective job, frankly, in raising the standard of living across the planet.
Well, those knowledge workers now are consuming, I'll call it, are producing about $40 trillion in spend and economic opportunity in terms of their salaries and bonuses, all that sort of a thing. Every one of those knowledge workers' businesses will now be impacted by Gen AI. For one of our companies that Satya announced on his build conference, Gainsight, which is the first one we got out of our factory,
Actually, the implications of going from one user to 12 agents doing the work of 12, 15 people and even more in that context, you can see the productivity dynamics. A user, a customer service agent who may have 300 or 400 customers that they have to manage maybe gets to five or eight of them a day. We can get to all of them every day.
So you can see the productivity implications of that on the knowledge worker environment. So if you aren't utilizing agents today, your job will very much become at risk. And if you are utilizing them, you have the potential to actually create a massive amount of value as an orchestrator of how those agents do the work and the tasks that you work on every single day. So massive implications in terms of how it changes the work environment and the workforce globally.
Colin here back at CNBC HQ. Great to see you as always. Leslie, thank you very much. Hey, Robert. Frank Holland here at CNBC HQ. Great to see you as always. We're talking a lot about agentic AI. And you've said before it's important to be fast and you also have to be first. You said it's not really a rising tide with a lot of winners. It's about being fast and first. Are you looking in the quantum space as well? And where do you see the opportunities? And here in the U.S., are we fast? Are we first? Where do you see that race going?
It's a great question, Frank. And I do believe you have to get there fast first. And so which is one of the reasons we're building our systems at scale so we can convert them in a factory-like environment as opposed to individual instances of success in portfolio companies. So even our smallest companies have access to this platform. They have access to our relationships with Anthropic and OpenAI and Microsoft and Google, et cetera. All of those
those important parts of building out the ability to get all of the companies fast first and then from an underwriting perspective, how do we find companies that we can transform the rule of 70 or an agentic in business going forward, which we think will create a massive advantage for this thing. When you think about
quantum, I think one of the areas where it's going to really impact our world, which is how we're embracing it today, is when you create agents, one user now goes to multiple agents, 10, 12, 15 agents. You've now increased the surface area of attack.
If you think about it, as a user, we have to protect you from cyber attack. With agents, you now, you know, you actually have a multiplicity of surface area of attack vectors. So quantum encryption, I think, will become, which is one of the things we're working on with our portfolio companies with some very specific partners,
a very unique way in which we can protect our agents. In some cases, it's going to be in an environment in a virtual machine. In other cases, it's going to be protecting specific and individual agents in the environments in which they operate. Those are the two phases that we're already working on today with very specific partners on how to use quantum encryption as a protecting agent for our agents. It's a great question, Frank.
In the last couple of years, Robert, you've taken about six companies private. And you've alluded to the fact that valuations are a bit elevated. And if they weren't so elevated, maybe you'd take more companies private. I want to talk about the health care space, at least in the public markets. That's not true. Elevate valuations have been a bit discounted. Are you looking in the health care space? Do you see opportunities for enterprise software in that space right now?
We are constantly looking for opportunities. I think you know this, Frank, as we saw the valuations increase in that bubble in 2021, and I call it the tech wreck that happened after 2021. That's what we've done. Again, six take privates in that period of time at valuations that were equal to one of our best returning funds in 2017, 2018. So we're excited about that. And then creating an agentic solution set for many of those businesses and being able to optimize
them at rule of 70, rule of 80 with agented products that they can sell to their environment creates a massive return opportunity for the funds that we're investing with right now. Now, across every single sector, of course, within healthcare, you have to think about a different regulatory environment dynamic.
All that said, we have a company today, and I was on the call last week with our CEO and the product development team, and how we are agentifying that entire business. So a massive opportunity that will actually create a TAM expansion of 3X of what that company had existing. So again, as we have built this factory and have the agentic solution sets that you've actually got to create,
a set of, I'll call it administrative agents that manage the working agents in a way in highly regulated environments. You don't actually create risk by introducing agents to those environments. As we, I'll call it, perfect those, it creates a massive opportunity for us to look more at enterprise software companies that are in the healthcare space specifically. So it sounds like just a kind of
Recap your thoughts here. A year ago, there was this notion that AI spend was going to eat up software spend. And if you were kind of in that software space, more legacy space, that you were going to miss out on the AI revolution, not benefit from it.
It sounds like that's dramatically transformed with agentic AI over the last year and will continue to do so in the future. I think that's a great insight. What is actually happening is AI can feed enterprise software, but you have to have what I call the sovereignty and dominion of the workflows and the data sets for that to happen. Otherwise, you end up in a state where you don't have a right to exist.
already are the trusted provider of the workloads, the information, and you're producing the data, unique data in an environment, some cases it's an industry, in many cases it's the company, you will be the trusted partner. That is your right to win, and you create agents that actually have all of the requirements on compliance and regulatory and the administrative pieces of it, a massive opportunity for your customers to benefit from, and as the enterprise software vendor to actually benefit from as well.
Hey, Robert. Frank again. A couple weeks ago, you were on our air. You said you believe that when it comes to trade and the administration, we're going to see a number of bilateral deals coming up. It's been a few weeks, and of course, we're in the middle of two pauses. But what's your view of the trade negotiations right now? I'm sure you also have insight through your companies. I mean, where do you think we're at when it comes to a China trade deal and also deals with some other countries?
I can't give you specifics of where we're at, but I know that based on our partnerships, our relationship, because we have, you know, again, we operate in 180 different countries, I'll get calls from certain of our sovereign wealth partners and saying, hey, listen, we're looking to change some shape of a deal. And it's going to massively change trading dynamics.
Of course, enterprise software gives you insights into that. One of our companies in our Endeavor Fund actually has the ability to do the modeling around how the supply chains change. And we've seen a massive spike over the last three weeks as these trade negotiations have gone on from some of the more interesting customers saying, okay, how do you model this?
changing the tariff, changing the trade agreement in terms of shipping, et cetera. So the interesting thing about enterprise software is we kind of get kind of canary in the coal mine insights because we actually see how people are utilizing the tools and the data and the information flows about how they're thinking about modeling and evaluating certain changes.
very optimistic that we will as we end up with these these trade deals getting settled that it'll actually create a unique opportunity again not only for us but for you know the new equilibrium set of trade for people to actually take advantage of so I'm excited about that where we are in the state you got to go talk to Scott about that the Secretary of Treasury about where we are in the state current state but I'm seeing already activity of people doing some what-if and scenario planning using some of our software tools.
data clearly stole the new bolt. Absolutely. Robert Smith, CEO of Vista, thank you so much for joining us here in Berlin from Super Return. Always a pleasure, Leslie. Thank you. Thank you, Frank. Frank, I'll send it back to you. Robert, thank you very much. Leslie Picker, great interview, as always, doing such great work there at the Super Return Conference. I know you have another big interview coming up later today. Thank you again to our Leslie Picker live from Berlin. All right. That was Robert Smith from Vista Equity Partners. Again, great interview with our Leslie Picker. We'll be right back after this break. Stay with us.
Welcome back to Worldwide Exchange. European markets slightly higher in the early trade ahead of today's ECB decision. The region continues to find fresh love from investors that are shifting their strategies. Our Karen shows live in London with much more on that trend. Karen.
Frank, well, international markets are still running on adrenaline. That sugar rush is coming into pockets of Europe as well. For instance, a record-breaking streak on the DAX in Germany again at fresh highs intraday in the morning session. And elsewhere, it's defence. Don't forget, a big theme has been playing out in the defensive area of the market.
of those stocks are up triple digits on the EU's commitment to ramp up defence spending and our NATO asking allies to spend 5% of GDP. So major names like Henshot have shot up more than 200% year to date. Underappreciated though, the double digit percentage gains you're witnessing in big cap stocks in Europe too, benefiting from EU's fiscal hopes, the diversification trade. So you're seeing that playing out in tech, SAP, Siemens for instance, and also the European banking space. Is there more of the way of catch up?
Some still think Europe is undervalued. Back to you, Frank. All right. Our Karen Cho live in London. Karen, thank you very much. Take a look at futures higher across the board. That's going to do it for us on Worldwide Exchange. You've been listening to CNBC's Worldwide Exchange. You can always catch us live weekdays at 5 a.m. Eastern. My name is Lily and I've had hydrodinitis suprativa HS for years. I finally found some relief since taking Cosentix. Relief means I can show up more.
or worsen.
Ask your dermatologist about Cosentix.