Good morning everybody. Welcome back to another episode of the market open. We are live. It is Thursday, October 30th, 8:47 a.m. What a week it has been. It's hard to even believe that it's Thursday given how crazy this week has been, but yesterday was one of the most important days in the stock market for 2025. And we have got a lot to talk about.

We've got big tech earnings, Meta, Microsoft, and Google. All three of these companies incredibly important. One of them did really good. The other two did okay. One of them's dumping. The other one's actually going up. The other one's flat. Meta's dumping. Google's up. Microsoft's flat. So, we'll talk about it. We got the Fed rate cut yesterday. That was a big deal. We got those 25 bips. Market kind of didn't care based on some of the comments JPAL made. I think it was less about the comments JPAL made. I think it was more about the fact that a lot of it was already priced in. We were already trading at all time highs. We're basically already still at alltime highs even though we are red in the pre-markets. And so we will talk about kind of the implications of that rate cut.

And then yesterday last night we had two major thing happened, two two major things kind of take place at the same time. Number one is you had this guy hit $200 overnight, which is kind of crazy, but Palanteer has a two-handle in front of it or it had a two-handle in front of it last night. Maybe we get it back today, maybe we don't. Either way, very grateful for Palanteer to even be in this position. And I think a lot of people were grateful to see the momentum and potential of that momentum last night.

And then number two, you also had Trump and Xi communicate on the deal that they supposedly make. Now, a lot of people are asking right now, wait a second, why are are we red in the pre-market? Like, what's going on right here? Have Trump and G officially signed a deal? And this is what we're going to start off with for the show, and we'll kind of talk about what's going on. But a deal was made, but a deal was not officially signed. And I think that's the issue.

aka after the two hours of negotiating, it was about an hour and a half in this private military room in South Korea, Trump and Xi came out and they didn't really address the media. They didn't have a press conference. They didn't officially say exactly what's going on. Trump on Air Force One then said a bunch of different things for what the deal would entail. Bass clarified some stuff in the morning and that's why you're getting some of the red momentum you're seeing in the pre-markets right here. I genuinely think it's because the market doesn't fully believe we have a deal yet.

And you know S&P is at 684. It's down half a percent. We were at 689 yesterday. Like this is not some horrendous red. We'll see at 930 what happens. But Nvidia 212 to 203. Palanteer 200 to 197. Robin Nood 147 to 141. Tessy 465 to 455. I mean you definitely have red candles across the board. One of the only stocks that's not really red is Google because I mean it was just a perfect quarter and that's why Google's up 8% right here. But it it is quite fascinating how the market is interpreting this shiny deal.

Almost like the market's saying we are not going to fall prey to what has happened over the past couple months when you told us there was a deal and we're going to wait until it's actually official. Even if even though Trump did give some specific details that you would imagine had to be negotiated, but because there is no official statement from the US embassy, no official statement from the Chinese foreign ministry, the market's kind of just like we don't believe it. And so I think that's why we're red.

We'll talk about the implications of that deal, but that's my best kind of logic for why we're red. Now, why is crypto red? I don't know, dude. Crypto cryptos I if someone else can explain to me why these two assets, Bitcoin and Ethereum, cannot catch a bid, I would love to hear. Bitcoin back to 108. It was 116 on Monday. Back to 108. Rate cut, don't care. China cooperation, don't care. I mean, I feel like something deeper is going on with Bitcoin and in crypto, but we'll talk about it and we'll see kind of what's going on.

Um, all right. So, let's get into the China deal and we'll get into it. First of all, real quick, we're going to talk a lot about Meta, but what's going on with Meta? The the simple thing for Meta right here, actually, why don't we start with Meta? Let's do big tech earnings, then we'll do China because I see a lot of questions right here about Meta. And so, let's get into it. And again, thank you everybody for being here. Thank you for those who stayed for the uh nine hours and 45 minutes yesterday. It was a fun experience. My mom texted me. She was like, "Were you were you live for nine hours?" And I was like, "Yeah, it was it was a pretty wild day." My dad called me. He was like, he was he was upset. He's like, "Did you eat anything?" Like, "What's going why are you live?" I was like, "Dad, like it was a big day." He's like, "Did you eat?" I was like, "Yes, I ate." As as long as you eat, Indian parents are like, "If you eat, they're happy. That's all that like as long as you eat, they're okay." I was like, "Yes, I ate. I had some chicken and broccoli on the street. I ate." But uh yeah, no, I appreciate everyone who stayed. It was a really fun day. And uh it didn't even feel like nine hours to be honest with there was so much going on that it kind of just it felt like it was it was it was hanging out with your friends for nine hours. So it's a good time and thank you everybody for being here. We'll probably do it again in the future if we have those crazy days um where we have to cover everything for the markets.

All right, so let's get into it. Meta, what's going on with Meta? Meta basically there there's two reasons why Meta's down. Number one is that they took a onetime $15 billion tax charge. Uh I thought that was a stupid reason for Meta to fall. So I bought the dip yesterday. So, I bought at 750, bought five shares for the hell of it. Say, let's have some skin in the game for earnings. And then I bought a little bit more at around 684 when it dropped yesterday, which I I thought was a decent price given that it rebounded all the way to 75. Now, it's back to 672. So, obviously, the dip keeps dipping. And I think a lot of you guys in the chat from what we were talking about also uh bought the dip.

There's two reasons. The six this basically $16 billion tax charge was something that the street was annoyed with. Uh I don't know why because at the end of the day, companies have to pay their taxes. So, it's like I mean you can take the stock down for them paying their taxes, but it's not like, you know, it's not like they're not paying their taxes, which would be a different reason to take the stock down. So, that uh caused an EPS miss. And as a result of that EPS miss, um the stock put up a dollar six a share versus 660. And the street got pretty upset about that. If they didn't have that $16 billion tax charge, they would have beat by 720 or they would have beat by 10% because the EPS would have been about 725.

So, that was the first thing the street was upset about. The second thing the street was upset about is that Zucks basically said for fiscal year 2026, yeah, diluted EPS was great. For fiscal year 2026, they are spending more aggressively on capex and the street really didn't like that. And I am a bit confused. We have a couple of analysts that that have put some thoughts out on beta that that we'll talk about in a second, but I was a bit confused by that because the street wants them to spend more. I mean, Google said they're going to spend more on capex. They went from 85 billion to 93 billion. Why is the street not upset about the gooks? Now granted, Google had other parts of its quarter that were really good, but it's almost like they're punishing Meta for spending more on capex because it's like they don't believe that it's having an impact on their operating metrics.

But then when you look at the operating metrics, revenue is up 26%. This is a $2 trillion company. Google's not growing at 26%. You know, Meta Meta is growing almost like a like a SAS company in the early days, which is impressive. Operating income is up 18%. Daily active people is up 8%. I don't know how they keep finding more people to use this platform. Ad impressions, their core metric is up 14%. And their price per ad is up 10%.

So, you know, Google had an incredible quarter, but it's almost like the market is thinking that AI is having a bigger impact on Google. And there are some metrics to to make that analysis with Gemini usage, API usage, all that stuff. So, so that's fair and Google deserves their premium uh and their momentum that they're getting right here. And quite frankly, it would not surprise me if they break 300 in the in the market open. But it's almost like the streets just doesn't like what Meta is doing with AI and they don't think that it's going to have the type of impact that Google is getting from AI. Also, Meta doesn't have a cloud business. And you know, Google has a very juicy cloud business that increased their operating margins from 17% to 23%. Not easy to do and kept the growth rate at at 34%. And so, and so maybe that's the difference.

Uh my overall thought on this is that I think a year from now we're going to look back and if Meta has any meaningful impact from their AI prowess, then I think this will be something that people look back and laugh at. I did say over the past couple days though that I was worried about Meta simply because Zux is spending like crazy and the street could get upset about that. And yeah, the street is upset about that. But it's not like him spending like crazy affected the earnings. And and and you know, and this is kind of the the typical issue with Meta on on the on the sort of like base surface level. You're like, "Oh, Zux is spending like crazy. There's no massive AI moat outside of the AI increasing the advertising. So maybe the street gets upset." But when you look at the numbers, the the numbers are phenomenal. Even if he's still spending like crazy, which means they're able to stomach all the crazy spend.

But uh but but but this time the street just wasn't happy about it. And I think it's maybe because of the perception of not only the tax charge they took, but then the way he answered questions on the earnings call that just made them feel like maybe he doesn't have everything together in regards to an AI story, which again, I think in a year from now, it's going to be stupid. Meta is now trading at 21 times fiscal year 2026 earnings. We're talking about Meta. We're talking about a multi-t trillion dollar company trading at 21 time. I mean, I I think it has to be the cheapest Mac 7. When the market opens, we'll look at the multiples, but I don't know. It feels rather attractive.

I am curious to see how bad they're going to take Meta down. EPS down 84% is not good. Again, their EPS is not actually down 84%. They had to pay their taxes. So, I would rather a company pay their taxes than not pay their taxes. And at some point, you have to pay it. It's a a one-time charge. You know, that's why when I saw the numbers originally, I was like, this can't be real. But then when you look behind the hood in the accounting, it's like, okay, so they have to pay their taxes. So, I don't think the taxes the tax charge is why the street is taking it down 10%. I think there's something deeper here around the trust around Zucks and AI because the street's smart enough to move on from a tax charge, but nonetheless, you're seeing the pain that you're getting right here on Meta.

Um, so let's read some of the analysts and what they had to say. So, uh, Bank of America, they lowered their price target from 900 to 810. Again, going to this argument that the street is not exactly the happiest, but they still have a buy target. We expect Meta stock to be controversial giving an a limited EPS growth outlook in a year-over-year free cash flow pressure in 2026. However, we see Meta in a position of strength with a massive user network and the opportunity to integrate compelling AI products over the next few years. We believe the bad news on expenses is now mostly in the stock while product catalyst including a new large language model and content creation tools can drive upside engagement and revenue in 26.

Rosenblat says hey uh 1117 is our price target. Meta's 3Q 20225 was great. The guidance for the high end of 2024% year-over-year growth in fourth quarter sales is 3% above estimates. So they beat on guidance. Consternation postc close comes from spending. Meta advised of expectations to spend 72 billion on capex up from 66 billion. So their increase in capex to absorb expenses this year of 118 billion. In 2026 capex spend is up to notably larger that was the exact word Zux used notably in dollar terms while 2026 expenses are set to grow at a significantly faster rate rate but we net it out and still end up raising IBIDA and adjusted EPS estimates for fourth quarter in 2026 driving our price target up 3%. The topline ROI on these AI investments appears to support the spend. We maintain our buy rating and raise our price to 3%.

So you have two different perspectives. One perspective is hey it's cheap but we're not going to give it a super big price target because we're afraid of expenses. The other argument is hey it's cheap even with the expenses we're going to give it a high price target because the growth is as strong as any other tech company that's out there.

Well, that's another concern. Zux is spending on the glasses and Reality Labs continues to lose money. So, that's also not the best thing in the world for Meta. I'm not a big fan of the glasses. I'm not a big fan of Reality Labs, the metaverse thing. I don't know why he keeps working on it. But again, when you look at the numbers, even if you take all that into consideration, Meta still becomes cheap if they're able to put up this earnings growth. Now, if their AI is not able to do anything other than advertising, which has been the concern I think a lot of us have been thinking about over the past couple weeks, that it's just ads. There's no cloud provider like Google, Amazon, Microsoft. Amazon and Apple do have earnings today, so that's going to be important. There's no uh LLM like Llama is not something that people use. Gemini just hit 650 million monthly activives. There's not really any of this of a consumer product outside of Facebook and Instagram that is using AI on a daily basis, although they have like their meta AI. If there's nothing else besides ads, then it's like where exactly is all the spend going to? And I think that's what a lot of people are thinking about as well.

All right, Google. Let's talk about the googs. First of all, if you own googs and you're heavy into googs, uh you got to give yourself a pat on the back. I mean, this stock did take a bit of hardcore conviction to stick through uh in the months basically from January till call it August until it finally started making a move. Google has basically doubled in less than four months for a company that is now worth almost 3.5 trillion. I mean it is just incredible to see.

So what did Sunder put up? Well, they're doing 7 billion tokens per minute. They have 650 million monthly activives up from 450 million in uh Gemini. 34% year-over-year cloud first hundred billion revenue quarter $155 billion backlog and $300 million paid subscriptions across Google One and YouTube. I mean, even Elon had to say, "Nice work." After seeing those earnings, I thought this was a perfect quarter. I mean, I we listened to the call yesterday. Call was incredible. Sundar was on top of his game. Basically explained how they are building the ecosystem that they're building and how it's starting to work and you're really starting to see the advertising result.

This is what it looks like on a visual basis. Gross profit was 61 billion. Search, by the way, up 12% year-over-year. Search is not slowing down. Or actually, sorry, search is up 15% year-over-year. Last quarter was 12%. So, it actually accelerated quarter over quarter. YouTube's at 10 billion. Uh Google Play is at 12.1, Google Cloud at 15.2. And then overall net profit, Google, basically every dollar that came into the business, 35 cents of those dollars came into the net income. 35 billion in profits. It's incredible. It's absolutely incredible. Google deserves it. I think this one's going to 300. Seems pretty obvious right here that it has a shot to get there.

And the fact that Google Here's the other thing. The fact that we're red in the pre-markets because of this China stuff that we're about to talk about and Google's green. I don't know if Google can hold the green, but the fact that Google is going the opposite of the entire market and saying, "Nope, we are not letting this one fall away." Uh, you're seeing a lot more excitement with how the tree is thinking about it. Here is what uh Goldman said. They raised their price target to 330 and they said uh Google cloud was the highlight of the results with our in our view 34% revenue growth 79% revenue backlog growth a change of 2025 capex guidance from 85 billion to 93 billion... You've also got Whimo and Quantum, right? You've got Whimo that is starting to grow. Uh Sundar said it's going to to Tokyo and London next year. And then you got quantum, whatever that could turn into, Google's making progress there. So, you just got a lot of different elements to Google to be excited about. And I mean, I don't think it's it's something people would be scared of selling right here.

Microsoft, last one we'll talk about, then we'll get into China and all the earnings that we got this morning. Uh Microsoft 525, that's down 3%. Microsoft, the reason they're down is for two reasons. Number one, they took a $3.1 billion OpenAI hit uh as per the restructuring. By the way, OpenAI reported last night, well, Reuters reported that they're trying to go public in 2027 at a trillion dollar valuation. Microsoft would own about 30% of that trillion dollar IPO. So that is bullish for Microsoft, but they did take a $3 billion hit and they're going to be adjusting their revenue estimates going over the next coming quarters because OpenAI is not going to be included anymore.

The other reason that Microsoft is down is because the whisper number on Azure was slightly higher than what Microsoft reported for guidance for Q4. And as a result, although Azure grew 40% for Q4, Street was expecting a little bit higher, they came a little bit lower. Microsoft's probably going to beat that number anyway. But in the short term, until you give the street what they want, you know, they're going to hurt the stock. And so Microsoft is up 30% year to date. We saw it go to 550 on that opening ideal a couple days ago. I think this one is absolutely a nothing burger. This one is way more of a nothing burger than Meta because Meta, you know, Meta had to take that tax charge in the streets, not really believing their AI story as much as Microsoft, but Microsoft did get hit.

the the real summary of all three of these tech companies is that they put up the results they needed to put up to justify the S&P 500 potentially getting to 7,000. Maybe not tomorrow, maybe not this month, uh, you know, maybe not even in November, but if you're talking about an S&P that could get an exact a increased multiple based on companies continuing to report, Meta, Microsoft, and Google did not disappoint. Maybe Meta disappointed a bit with this tax thing, but if you look past that, you've got a beat on the top and the bottom line consistent with a lot of other companies, the big three companies in tech put up a beat on the top and the bottom line, which is very important.

All right, earnings in the pre-market. Let's look at that real quick and then we'll get into what happened with China last night. So, we had a bunch of different companies. Uh, first off, Mastercard beat on the top and the bottom. Then you had Roblox. They lost 37 cents a share versus 51 cents. They beat by 27%. Another beat on the top and the bottom. Roblox right now down 7%. All right. So although you had a top and the bottom beat, looks like something in guidance or something in the call maybe not going the best and that's why the street took them down. Crocs consumer company beat by 24% on EPS. Again, another beat on the top and the bottom. Uh you had Hershey's, another consumer company, beat on the top and the bottom. One of my favorite companies, Estee Lau, dude, beat by 78%. Big Pharma, Eli Liy top and the bottom beat. Then you had Merc more big pharma up 10% EPS or a beat by 10%.

I think what we're seeing across the entire market are these margin efficiencies that are causing these EPS or just overall better operating structure from a lot of these companies that need to continue inching out a profit. I mean, it's hard to see almost 80% of the S&P 500 beat on earnings and say there's a massive structural problem in the economy.

The other company that we should talk about that had earnings last night and then we'll get into this China stuff is Chipotle. I don't know what's going on with Chipotle, but it's down 18%. We listened to the CEO a little bit and basically he said that um the consumer that makes less than $100,000 is not showing up to our store. McDonald's did say the same thing. So it's something we have to keep track of. Are these consumer companies that are catering towards people in that 100,000 or less income bracket? Are they not seeing the type of foot traffic because there's a demand issue and like people can't afford to eat Chipotle, McDonald's, etc. Or does the food just suck?

Okay, let's talk about China. Let's talk about the US and China. I know a lot of people are confused about why we're red right now after the uh supposed deal that we got with China, but let's uh let's talk a little bit more about kind of what's going on right here. So, this was them meeting for the first time in about four years. The handshake was strong, but it's not, you know, people were observing the body language and they were like Trump didn't like legit pull him into uh you know, Trump usually pulls somebody into when you're doing the the handshake, so it wasn't as aggressive, which people were saying was a sign of like respect or whatever.

And then this was Trump on Air Force One basically talking about the meeting afterwards even though they didn't have a press conference. "We've come to conclusion on many very important points and we'll be handing that to you in a little while. We're in agreement on so many elements. Tremendous amounts of the soybeans and other farm products are going to be purchased immediately, starting immediately. We on fentinol, we agreed that he was going to work very hard to stop the flow."

The US and China will collaborate on Ukraine. Trump will visit China in April of 2026 and Xi will visit the US soon. China will begin buying soy soybeans and resume rare earth exports. On Nvidia, he did say the US and China will continue to further discuss Nvidia chip restrictions. He specifically said, I don't know about Blackwell, but we will still discuss chip restrictions. Which is discouraging if you're an Nvidia investor because, you know, if Blackwell can't be shipped, you know, the Chinese probably don't care. And then overall, China tariffs are going to be cut from 57% to 47%. And then fentinel tariffs will be slashed to 10% and China is going to be working on the stop of the spread for for China.

The problem is we didn't get any joint press conference with with both of them and you would think after a deal I mean it's not like these guys can easily just go on a plane and meet each other like this was trip was planned for a long time. You would think after the negotiations they would have a dual press conference and have a conversation. Maybe logistically they felt that the trade representatives like Jameson Greer and Bent and Lee from China need to have a deeper discussion after Trump and Xi met in person and it was kind of a formality for Trump to meet Xi and for them to just like handshake agree on the stuff and then afterwards their trade representatives would come to a deeper technical conclusion on what the specifics of the deal would be like. Maybe that's what's playing out or maybe there's no freaking deal.

I think the market, there's two reasons why the market's red right here. Even after an amazing big tech earnings and after this China stuff is number one, the market doesn't think there is a legit deal. And until it's signed, the market's not going to care. And then number two, we were at all-time highs yesterday. So, I mean, you know, we were pushing 690 on the S&P. You're probably going to have some people take profits.

Wow. Oh, they're really taking Meta down to 650. Dude, goodness. If there is a narrative overhang on Meta, which is something to not ignore because we've seen stocks that get a stupid narrative overhang... I mean, we saw what happened back in 2022. I'm not saying that it would go that low again, but it could be something that is just not the easiest for the stock to recover from in the short term.

Oh, folks, I think this is actually the reason why Meta is taking a deeper hit. Let's get some coverage on this. Oh, that changes the story. 25 billion in debt is a little different. Guys, this looks new. This looks new. Meta is doing a six-part bond sale seeking to raise 25 billion ranging from 5 to 40 years. These are corporate bonds uh at a premium of 1.4% above treasuries. That okay, that that that that is actually why I think the stock is getting hit. The street does not want to see capex finance through debt. And Meta is the first company outside of Oracle to legitimately tap the debt markets. Their new total to debt load is 70 billion. In 2021 they had 14. Yeah that's actually that I mean that's probably the deeper reason why Meta is red.

Last thing before the market opens, this is what JPAL said yesterday. He was pretty bullish on the state of tech right now. This is different in the sense that these companies that are so highly valued actually have earnings and stuff like that. So if you go back to the '9s and the dotcom, they were these are ideas rather than companies and you know we're we're so there's a clear bubble there whereas the you know the I won't go into particular names but they actually have earnings and you know it it looks like they have business models and uh and profits and that kind of thing. So it's it's really a different thing. The investment we're getting in um equipment and in all those things that go into creating data centers and and feeding the AI it's clearly part one of the big sources of growth in the economy.

9:30 a.m. Thank you everybody for being here. The stock market is now open. Meta 665. 665. that bond sale that definitely changes a bit more of the narrative on Meta if they are taking on debt for those that are just joining 25 billion in corporate bonds they are raising paying about 1.4% above a US Treasury note and as a result I think that's why you're seeing some weakness right there Meta 11% down 87 market cap just lost about 300 billion for Meta.

Apple, wow, 273. Markets bloody red and Apple goes up. Apple well above a $4 trillion market cap. Nvidia's at five still. Meta's at 4.04. And then Microsoft's at 3.9. Where is Microsoft stock right here? Microsoft is at 532. I mean, this is a nothing for Microsoft. I mean, down 2% is nothing. Meta is the one that's really getting hit.

One of the reasons the market could be down as well, which again I think is a really weird reason. But yesterday pal started off the call by saying we are not going to confirm the validity of a December rate cut. No one believes it, but because Powell was stressing it yesterday, that could be another thing that's making the market a little bit more hesitant before going higher. And you could see that as a reason along with the fact that China US deal is not officially confirmed.