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Welcome to Yahoo Finance’s flagship show Morning Brief presented by Robin Hood, the home to commission free trading. I’m Julie Hyman. Let’s get to the three things that you need to know today. First, the fulcrum of the AI trade may be shifting, or at least expanding, since Alphabet rolled out the latest version of its nano banana image generator 2 weeks ago. Adoption of both it and its Gemini AI chatbot have been gaining steam. OpenAI’s.GPT still has more than twice the users of Gemini according to Sensor Tower data, but from August to November, global monthly active users rose by 5% for ChatGPT compared with 30% for Gemini. Meanwhile, another OpenAI rival, Anthropic is in preliminary talks for an IPO, according to the Financial Times, and Amazon introduced both new chips and updates to its AI models. Plus bad news.appears to be good news for US stocks following the latest read on the labor market. ADP private payrolls for November showed hiring at US companies fell by the most since 2023. Jobs decreased by 32,000 last month, and with companies with fewer than 50 employees shed 120,000 jobs. It’s the latest sign of labor market weakening, which is fueling bets on a rate cut at the Fed’s December meeting.And we are watching earnings from Macy’s and Dollar Tree. Macy’s did top earnings estimates and raised its guidance for the fiscal year. Macy’s CEO Tony Spring said the sales results were the strongest in 13 quarters. Still, the shares are under a little pressure today, but the stock had rallied into the report with the.Shares up 34% this year. Meanwhile, discount retailer Dollar Tree topped estimates and raised its full year earnings outlook. The results highlight how stretched consumers are prioritizing essentials and purchasing fewer discretionary items. Dollar Tree shares are up 45% this year.Let’s get a check in on stock futures. Right now we’re seeing a mixed picture, sort of bad news being good news, notwithstanding. In other words, does bad economic news bolster the idea that the Fed will indeed cut rates next week? Right now, Nasdaq futures, though little change slightly to the downside. We’ve got Dow and S&P futures very slightly to the upside. So let’s dig into our top stories of the day. That ADP data signaling a weakening labor.Market and the AI race heating up with shares of Alphabet outperforming Nvidia and Microsoft recently. Plus the biggest takeaways from Macy’s and Dollar Tree earnings. Joining me now, senior reporter Ali Kau live at the NASDAQ, senior reporter Brooke DiPalma, and tech editor Dan Halley. Ali, let’s start with you. I never realized Howley and Ali sort of rhyme before I just said those two things together. Um, Ali, let’s start with you and those ADP figures.
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Yes, so a surprise here. We saw private employers shed 32,000 jobs in November. The expectation was additions of 10,000 jobs. Now the October data was revised higher from 42,000 to 47,000, but still, this doesn’t look good here. Now, according to ADP, job creation has been flat during the second half of 2025. Pay growth has been on a downward trend in November, hiring.Was particularly weak in manufacturing professional business services along with information and construction. Now, according to the firm, small businesses have been hit the hardest here. So this really emphasizes the Khad economy that we’ve been discussing. You have those higher income consumers, those consumers that are more levered to the stock market. They may have assets in the housing market as well. They’re feeling OK, whereas the lower income.is feeling the squeeze and part of that is due to the job market. Now you mentioned Julie how bad news is good news. That seems to be what the market is interpreting at the moment because that means more Fed rate cuts next week. We have that critical December meeting. The odds are now close to 90% that we will be seeing that 25 basis point cut that’s up significantly from even a month ago. So all of this just reiterating that the labor market continues to weaken.
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OK, so all of that said, we have continued to be talking about the outlooks for next year from many of the major players on Wall Street, and most of them on balance are pretty optimistic. We’ve got another couple to talk about.
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Yeah, everyone pretty much seems to be bullish, albeit with a few possible headwinds heading into next year. JPMorgan out with its full 2026 outlook this morning. We also heard from BlackRock and Bank of America yesterday. Now when I talk about some of those risks, we’ve been hearing something called stagflation late, a stagflation late environment heading into next year. So inflation is still expected to be a bit sticky there as the economy, as I mentioned, just continues to.Run on this two track case shape. So that’s something to dive into more as we head into the new year. But Wall Street does see plenty of catalysts ahead. A lot of that has to do with the AI boom, Fed rate cuts. Another expected year of double digit earnings growth. We know that earnings has really propped up this rally heading into year end. Now fiscal stimulus measures has also been cited as another way to kind of boost the.Overall economy and those productivity gains. Now BlackRock saying that AIX cycle still in its early innings with spending so large that not only is it a micro story, it is also a macro story and that it could lead to GDP growth significantly above the historic 2% trend that we’ve seen really over the past few decades. Now Bank of America meanwhile flagging that we might be in an air pocket when it comes to the tech trade. We’ve been talking a lot about whether or not we’reIn a bubble, virtually almost all of these firms say we are not in that bubble at this point, but Bank of America’s air pocket analogy, basically talking about the fact that we have CapE running ahead of sales. So in 2026 we might not see that proof that AI is really leading to sustained monetization, but it doesn’t mean that we won’t see that in the years ahead in terms of those specific targets, JPMorgan has a target of 7500.The year end 2026 S&P 500 upside of as much as 8000 if inflation moderates and the Fed continues to ease. 8000 seems to be the upper range here. Deutsche Bank also at 8000, RBC Capital Markets at 7750. We have Wells Fargo and Morgan Stanley at 7800, and Bank of America, because of that air pocket volatility, a little more cautious at 7100, but still expected to see those gains heading into next year.
6:39 spk_0
Yeah, and we talked, you talked a little bit about the AI trade as part of all of this. So Dan, we got to turn to you on this because it seemed to be really making the rounds and picking up steam yesterday, some of the latest stats on.Um, what people are downloading, what people are using in terms of their preferred AI chatbot, um, and it seems like Gemini is gaining some steam and there’s sort of some talk about like what’s the Google universe versus the open AI universe, although the universes are all kind of the same universe, I guess, but I, I don’t know, Dan, what do we need to pay attention to?
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Yeah, I think there’s, there’s a lot of kind of overwrought, uh, feelings about what’s going on with Google and, and OpenAI at this point. You know, Gemini 3 doing well compared to uh GBT 5. but you know, these things are pretty cyclical, uh, at least insofar as we’ve seen, uh, throughout the kind of AI race, uh, where, you know, OpenAI comes out.beats everyone with, you know, benchmarks. Uh, Google comes out, beats everyone with benchmarks, Anthropic comes out, beats everyone with benchmarks, and the cycle continues. So, you know, it, it is interesting to see people having this, uh, reaction.Uh, with Gemini 3, we’re gonna obviously see another GPT. Uh, I think that coupled with the OpenAI, uh, the information’s report about the, the red alert, um, you know, I think that that speaks more to perhaps the fact that, you know, when investors look at something like Google, they see a business that already has, you know, a, a base business case, right? I mean, advertising search, things like that.Uh, the fear originally was that, uh, OpenAI would, you know, just come in and steal search away. Well, that’s, you know, it was never actually going to happen immediately, right? Uh, if anything, these things take time, uh, and it didn’t mean that Google was just going to sit there with its hands, you know, tied behind.Back and say, go ahead, steal my business. Um, so obviously there was going to be uh this competition, and that’s really what we’re seeing. I think, you know, the uh latest conversations about uh Open AI spending uh probably lead people to say, well, look, Google can pay for this stuff so far.Um, OpenAI, the, the jury is still out on that $1 trillion worth of commitments. I mean, I can’t even begin to understand how they, they get to that point. Uh, and I think that’s really the question, not so much the, the technology, and then obviously you have the, the TPU conversation, the their chips versus Nvidia, and, you know, I, I think, look, the, the idea that they’re going to, you know, same idea, come and take Nvidia’s lunch, uh, and Nvidia just says, OK, well,I wish I had my, you know, milk and cookies. That’s not really going to happen, right? Uh, the TPUs are going to be a small part of the broader market. Uh, most likely, that’s analyst that I’ve spoken to has said that, uh, and Nvidia’s chips will continue to, to dominate at least for, for now, right? I mean, there’s other competition in the form of AMD, uh, and so, you know, if there was going to be a Apples to Apple’s competitor, that would be it, rather than Google.and its TPUs, which are powerful but in a more limited case,
9:47 spk_0
right, and um, you know, I think that Sensor Tower, that research that I cited earlier, the title of their note was Hast chat GBT peaked. So obviously that was a little provocative as it relates to that revenue question that you were raising. Um, there’s something else I want to mention, Dan, um, that you probably haven’t seen yet because we’ve been on the air here, but the information.Which has been breaking a lot of news as of late, um, is reporting that Microsoft is lowering its AI software sales quotas, um, which is intriguing. We’ll have to read more to see what that entails, but, um, that implies if the quotas are being lowered that, you know, the growth is perhaps slowing down on that AI software, um, sales and the shares, I think, are, are taking a little bit of a hit on that. So.I don’t know if that has to do with, you know, sort of slowing of the adoption curve, if it has to do with competition. I don’t know that we have a way of knowing right now, but again, it sort of speaks to this jockeying for position that we’re seeing among these companies.
10:53 spk_2
Yeah, and I think it’s, it’s also still a conversation as toWhat’s, what’s the adoption look like, right? as broadly speaking, you know, I mean, we, we talk a lot about what these companies are doing, uh, the revenues that they pull in, a lot of the revenues that they pull, you know, Microsoft’s revenue is highly tied to what it does with OpenAI.Um, so, you know, they’re obviously, they, they opened that, uh, agreement up more where, you know, they can work with other AI providers, they can provide cloud services to them, uh, OpenAI can look for cloud services from, from others who may have more capacity at this point.But the, you know, the fact of the matter is that Microsoft does rely heavily on on OpenAI and its capabilities. Uh, you know, they talk about how they’re seeing a lot of growth when it comes to the, the software side and consumer business customers looking at using more AI capabilities. But I, I think, you know, that until we get those super hard numbers about look, this is how many people we have, this is how much they’re paying, uh, and this is.What we’re seeing as far as margins on this kind of stuff, uh, you know, there’s still going to be a lot of a guessing game, I think, when it comes to the actual usage of AI and I think, you know, when it comes to the, the open AI, uh, sensor tower, uh, you know, versus Google and and Gemini, I think part of that has to do with, OK, are people using the Gemini app in and of itself? Are they using Google’s, uh, capabilities which run on Gemini?Um, you know, are, are people using Gemini in the sense of search or using it in the sense of when they go into, you know, the male app or or the docs app, uh, and use it there. There’s still so many questions as to what’s being used and what’s not at this point.
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And who’s paying for it, I think is the other right really important question because if you use it in Gmail, you’re not paying for it, right? A lot of people who are using.Gemini not necessarily paying for it. I mean, Chachi PT has a freemium model as well, but that then is the next question here that we’re going to have to be asking. All right, we’ve got to put a pin in that, although it does seem as though that Microsoft headline has put some pressure on futures as well. Brooke, we’ve got to get to it, you know, not just what we’re spending on AI, but what people are spending on gifts, for example, and clothing and pots and pans, I guess if we’re talking about Macy’s. So talk to us about what Macy’s said.
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Good morning, Julia. That’s right. Macy’s is a little bit under pressure this morning after the company beat on all three metrics on revenue, earnings, and sales growth, but yet they painted this cautious outlook for the 4th quarter, and that’s definitely put a bit of a downbeat this morning in the pre-market trading hours. If you take a closer look at the earnings report, this was the strongest quarter that Macy’s has seen in 3 years when it comes to the metrics that they posted, but that 4th quarter guidance is what’s really weighing on investors’ minds.Morning they said that they’re pleased with the start of the 4th quarter. However, they do expect consumers to be yet again more choiceful in the 4th quarter. So keep in mind the guidance that they presented that full year guidance, what they had presented would mean that they would see a decline in both earnings and revenue compared to last year. Now also, Macy’s has been doing this mega turnaround strategy. They have these reimagined stores. Those did outperform the broader Macy’s portfo.But it seems as though maybe it wasn’t enough to really please investors as far as that guidance goes to make your way into the end of the year. Now once again they did see those turnaround stores, those reimagined stores do better than expected. They said that that’s what really drove momentum as they doubled down on Omnichannel brand curation and also new category offerings. They really emphasize shoes and beauty and others as really new categories that the company is really doubling down on.Also worth noting too is that their luxury business Bloomingdale saw about an 8.8% increase in seams or sales growth. Of course, as Ali mentioned at the top, we’ve been watching that cases shaped economy. These high income consumers continue to do well based upon the stock market that we’ve seen, based upon the implications of how they’re doing in this sort of environment when low income consumers are under pressure. And so definitely that sales growth within their luxury business, Bloomingdale’s definitely also provided a bit of a boost there as well.
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All right, Brooke got to leave it there. We’re gonna talk about some more retailers later in the show. Ali, Brooke, Dan, thank you so much. Coming up on Morning Brief, we’ll bring you today’s top turning tickers and count you down to the opening bell.Welcome back to Morning Brief presented by Robin Hood. And now time for some of today’s training tickers. We are watching Delta, Marvel, and American Eagle. First up is Delta. The airline announcing a $200 million profit hit due to the government shutdown that equates to about 25 cents of its earnings per share. The government shutdown, of course, was the longest in US history and resulted in reduced flight traffic at dozens of US airports. Still, Delta said demand for the quarter remains healthy. Those shares changed a little bit changed, a little downside.Next up, Marvel, shares of the chipmaker jumping after it reported earnings that beat expectations. Marvell also announced it’s purchasing Celestial AI for at least $3.25 billion. The purchase price could increase to $5.5 billion if Celestial hits revenue milestones. Celestial developed something called optical interconnect hardware that connects high performance computers.And finally, American Eagle, those shares are jumping after it beat sales estimates and boosted its guidance. Its CEO says the stronger trends were the result of decisive steps on merchandizing, marketing, and operation. It also marks a turnaround for the company that saw weakness earlier in the year. American Eagle has partnered with celebrities like Travis Kelsey, Sydney Swee Sweeney, even Martha Stewart has been modeling in head to toe denim for American Eagle to drive traffic, and it seems like it’s been working.Well, as we mentioned earlier, many on Wall Street believe Google could be the new leader in the AI race, overtaking, at least for now, OpenAI and Nvidia. Our next guest says investors should be in a position to capitalize from a new phase in market leadership. Joining me at the desk is Adel Zaman, Wall Street Alliance Group partner. Thanks for being here. Pleasure. So we’ve been trying to follow the sort of day by day developments in this AI arms race, you know, um.Uh, reportedly open AI declaring a code red recently because of the increasing market share of Gemini. As an investor, how do you know where to look, what to pick? Do you just invest in it all? What do youdo?
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I, I think you do have to have a core exposure in all of these companies because it is an AI arms race and a lot of these companies, their businesses are good.But we do feel that at this point they’ve they’ve run up a lot. They’re trading on expectations of the business that they’re going to do 5 years from now.And we feel that a pullback in the market is imminent, and these are the companies that are going to get hit the most when the market does pull back. So we’ve been talking to our clients about the leadership in the market changing from the AI winners to the AI enablers.
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OK,I, I, I want to get to that in a minute, but I do want to ask you about this latest headline that we got about Microsoft, the information reporting that Microsoft is lowering its AI sales quotas.And this brings me to the question I was just discussing with my colleague Dan Halley, which is not just where’s the adoption going to be, but where is the money going to be spent, which kind of speaks to your AI enablers versus, you know, who’s putting it out in the world. Where, where is this money going to be spent? Or do you look at where it’s being spent now?
18:14 spk_4
Yeah, I, I think, I think we think that a lot of it is going to be spent on data centers because a lot of this money, you know, the AI related data centers, we expect that by 2030 are going to triple and, uh, globally, and we feel that north of $7 trillion is going to be spent globally on AI related infrastructure.So companies that are involved in building and maintaining those type of data centers and the infrastructure companies, that’s where we are seeing more value right now.
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Well, but I, I guess my question is, we know the money is planning to be spent on those data centers.Eventually, you got to bring in more revenue to fund those data centers. Now, the hyper scalers that are out there now, you know, the alphabets, the Microsofts, the world, they have lots of cash to do this, and they are starting to make some revenue related directly to AI.But don’t, but especially the likes of OpenAI are going to have to make a lot more in order to continue to fund that $7 trillion that you’re talking about.
19:15 spk_4
Yes, yes, and, and that’s where we think the risk is, right, because a lot of them are trading based on expectations that they’re going to draw in that profitability. But we just feel that at this point in time, and, and then also what we are seeing is that a lot of them are benefiting from that bonus depreciation.In the big beautiful bill which is pulling forward a lot of that capital spending, so so the balance sheets are looking really good now, but when the time comes for the show me like when the revenues are coming, that’s where we think there could be some vulnerability in these names. OK,
19:49 spk_0
so as you say, look at the infrastructure builders now and you’re not talking about an Nvidia, for example, you’re.Talking more about the actual physical stuff. I mean, Nvidia makes chips, but the other, the buildings,if you will. Yes,
20:03 spk_4
absolutely. We are talking about like the brick and mortar companies. So if we believe that AI is real, which we think it is, then we have to invest in the companies that build the infrastructure that makes it possible for AI to exist. So we are talking about construction equipment.Utilities, electricities, these type of companies are necessary for AI to do well.
20:26 spk_0
Um, what do you think about this now what’s become a sort of a new battleground about electricity prices which in some jurisdictions, um, the data centers have been pushing up those prices. How is that push pull going to, you know, work out for the companies that are trying to build this infrastructure?
20:45 spk_4
I think a lot of these companies that because the prices are going to go up, there’s a lot of demand for this. So a lot of these companies are going to really benefit from it as well.And we’ve been, we’ve talked about this on the show before. We’ve been investing in utilities. We’ve been over with that sector for the past 2 years, and they are direct beneficiary of this AI buildout because electricity is going to be needed, right?
21:08 spk_0
OK, so let, so other other than that, um, I am curious where where you’re looking for opportunities, you know, we’ve been talking a lot about Bitcoin.Recently, so I’m curious how you’re thinking about that in terms of how clients should be positioned.
21:22 spk_4
Yeah, in terms of Bitcoin and clients, I, I think we view it more as an asset diversifier, right? Like for us, one of the best investments so far has been gold, right, gold, we’ve been consistently investing in that. That has been one of the best performers this year, up more than 50%.Similarly, we view Bitcoin, and I think this sell-off in in Bitcoin is possibly an opportunity for those that missed out on the rally to get involved. And an easy way to do it for our clients is that Bitcoin, ETF IBIT, we have exposure there.And a lot of the sell off is probably driven by potential unwinding of the Japanese carry trade where risk assets are being sold. So I think that’s an opportunity to position into an alternative asset class for clients.
22:09 spk_0
OK, Adel, thanks so much for coming in. Good to see you.Well, coming up on Yahoo Finance’s opening bid, our executive editor Brian Sazi is with us now. Saz, you’re wearing a blazer, so I know something special is happening. Well, I’m just
22:20 spk_5
classing it up today, Julie, because, you know, why not? It’s Wednesday. Let’s put on that jacket. I’m going to dive into crypto and that rally there. Also going to go into the debate, Julie, which I know you’re following on whether Tesla.It is absurdly overvalued like Michael Burry suggests or maybe it’s an unbeatable by Julie. I’m not sure, just not sure yet.
22:39 spk_0
Well, we know some people who think it is, but we’ll see. I know one person,
22:42 spk_5
he’s on, he’s on pays for a $1 trillion pay package.
22:45 spk_0
Julie. Yes, we’ll see. We’ll see if he ends up being right. Thanks so much, Saz. And that does awarding brief presented by Robin Hood. Saz, he’s got you for the next 30 minutes.
