Just half a percent away for this S&P, 30 minutes until the start of your trade. I'm Dani Burger. I'm Mike Ball. Bloomberg Open Interest starts now.
Coming up, stocks push toward new highs, while billionaire Ray Dalio sounds the alarm on the bond market. Wall Street headed for a blockbuster year, profits topping $90 billion, and bonuses on track for a record. Plus, the big interview today: an exclusive sit-down with Jamie Dimon, the J.P. Morgan boss, on the AI boom and the risk he sees ahead. That's coming in just about 10, 15 minutes' time.
But in the meantime, let's get you what some of these movers look like this morning. Alphabet, Constellation Energy up 8.6%. Google is locking in more nuclear power for its growing AI needs, planning a 20-year deal with Constellation Energy. For its part, Constellation plans to invest more than $4 billion for the deal, adding about 900 megawatts of new capacity to the PJM grid, roughly the output of a new nuclear reactor.
The Treasury market, despite these moves, remains top of mind for equity investors as yields are still near multi-decade highs. Ray Dalio worries it could spook foreign creditors.
The Chinese don't want to continue to accumulate. When you have a debtor-creditor relationship, an adversary relationship, that's a very difficult dynamic. And then Japan, they've lent a lot of money. Now they want to take back some of that money.
Ray Dalio speaking to our colleagues in Asia. It speaks to the nature of this market. The more participants in this Treasury market that are price sensitive, the more movement like we've seen in recent days, where you get that type of volatility.
Ray is not wrong. He's been saying this for a while. It's always been lurking. It seems to be getting worse. This administration has certainly added more to the deficit. We have more worries about the Iran conflict. We also are losing dollar because there's other alternatives. It's more sensitive.
This is still a White House that wants to try to control it. Scott Bessent, the Treasury Secretary, saying they can do more to bend the debt curve. The rest of the market is skeptical. Participants are skeptical because it's a lot of talk at this moment and not a lot of action to rein in deficit.
A lot of attention is on the 10-year and 30-year auctions a little bit recently. We got to see how it is coming in and who's actually taking it down. If the Japanese and Chinese, as Ray Dalio was saying, are stepping back, the U.S. has to pick up more. That might be the household or eventually might be the Fed again.
In the meantime, stocks are near all-time highs this morning. Let's turn to Wall Street. Firms are poised to take in $90 billion in profits, smashing last year's record. Bonuses are also expected to reach an all-time high. Joining us is the senior U.S. bank analyst for Bloomberg Intelligence, who's also gearing up for bank earnings next week. Herman, is this just a really strong first half? How much is the second half contributing to what's going to be a banner year for Wall Street?
The first half was really spectacular, particularly in equity trading, and also the resurgence of IPO activity within the group. The second half is turning out to be a bit choppier. We've gotten some mixed guidance from the investor conferences over the past month or so, where some banks like J.P. Morgan are expecting continued growth in trading and investment banking, whereas Bank of America sees a bit choppier results across the trading front. Mixed results expected for the third quarter, and we'll see what it shapes up for the fourth.
Bringing it back to the local level, this is a big source of revenue for New York, New York City, the state. Generally these guys are still staying put here. The talent pool is here. Are you seeing anything that makes you think we have more exodus to places like Texas and Florida?
Yeah, I think you're going to see more diversification of the footprint for folks in the finance industry. We've seen banks like Morgan Stanley talking about opening up a hub in Dallas. Those things are continuing to shape up. I think a lot of it just deals with the tax regime here in New York, where it's a bit more precarious. Whereas some tax-friendlier states and locales are being a bit more productive in hiring these folks away. So that will be an ongoing thing, but we do think the senior execs will continue to stay within the New York complex.
Thanks for joining us this morning. Looking forward to catching up in just a little bit more time. Herman Chan of Bloomberg Intelligence. Jamie Dimon is going to join us for an interview in London. Tom Mackenzie will be there alongside Mr. Dimon.
Nvidia, investors continue buying the stock at a valuation that remains close to multi-year lows. Let's bring in Bloomberg equities reporter Carmen. I feel like it's an important part of the story. We are 5.8, 5.7 trillion dollars on Nvidia. Somehow it's gotten cheaper along the way.
It's crazy to look at it. Even in the pre-market, it's up. We're only a few dollars away from $6 trillion. If you thought about this a few months ago, it wouldn't have seemed like we should be anywhere near the ballpark. As you said, Nvidia's valuation has been very cheap. I think Jensen called it a growth value stock. It trades at about 17 times forward earnings. That's cheaper than the overall S&P 500. It's very cheap compared to the monumental growth that the company is still putting up.
So it's interesting that we're finally starting to see investors sort of go back into this stock. There are a few reasons for that. You had amazing earnings, which was to be expected. I think that's what everyone sort of anticipates. The largest buyback ever that they announced a few weeks ago, and with high interest rates, companies like this look like somewhat of a safe haven. So we're finally starting to see investors sort of go back into Nvidia after a pretty choppy year.
On one hand you could say the buyback is responsible, the stock is cheaper. On the other hand, we're always talking about capacity constraints. There's not enough out there. Is this the investors saying, wait a minute, we appreciate the buyback, but isn't there a better way to spend this money?
I think it could be. It's definitely a bullish call. They're saying we believe in this company, we're buying it here. I think that Nvidia, I mean, we've called it a kingmaker for years now, and I think there's so much belief around the story here, right? They believe that Jensen is going to get the capacity on mind. It's still top of mind for the chips business. If you have to put your money somewhere in an uncertain market, although it feels so silly to say uncertain market when we're in record highs, but there's still tension there, right? We have high yield. There's some underlying conflicts.
Thank you so much. Always a pleasure to have you on Bloomberg. Elsewhere in the world of tech, turning to deal news, Google has agreed to a 20-year deal to buy nuclear power from Constellation Energy. Constellation will spend more than $4.3 billion to build it out. Let's get the details from Ed Ludlow. What are the details?
Yeah, the main point is this: this is new capacity, right? It's the latest example of a hyperscaler, a big tech company, going direct to the power generator rather than to the grid. But Constellation is on the hook, as you said, for $4.3 billion, and parses that new capacity onto PJM, the biggest utility in this nation. Fresh off Constellation doing almost 700 megawatt deal with Amazon last week, we've done a lot on Microsoft and Three Mile Island, but it's a very long-term agreement, spanning a lot of years. It's just case in point of the energy requirement for maybe a new phase of running AI, but data centers for workloads.
This is like restarts and revamps, existing infrastructure. We all know how long it takes to actually create a new nuclear plant, which is why some of the micro-nuclear is interesting. How much more can we really do of the existing infrastructure here? Are we seeing the end of this story?
Constellation is the largest U.S. operator of nuclear-generated energy. And that's why I'm underscoring, again, this is new capacity, which will take billions of dollars and multiple decades to bring online. You know, some of the newer technology that you mentioned, a lot of that to this point, the reality is they are press releases. They're not energy generating or contributing to grids, and they're not loads of power going to data centers. Just like building the data centers themselves, we're tracking all of the announced, but it's probably smart in 5, 10 years' time to go back and audit how many projects came to fruition.
Ed, thank you so much. Catch him on Bloomberg Tech in just under two hours' time. A check on your markets this morning, 20 minutes until your trading day starts. We hit another all-time high on the Nasdaq. Now the S&P makes its run. It just needs to gain something like half of a percent in the market trade in order to get there. Yields come in as Brent crude giving this market some release, down 2.5%. Let's look at other movers this morning. With that is Norah Mulinda.
Dani, first up, Nike falling this morning after the stock was cut to sell and slashed the price target to $27.50. The firm says Nike's turnaround is facing deeper structural challenges, adding to pressure after the company's weak outlook that we did see last week. Shares down 0.7%.
Now turning to tech, Applied Digital taking its AI data center push to Europe and signing a deal for access to as much as one gigawatt of power in Finland. The first capacity is expected in 2028, with the deal structured to limit how much Applied Digital actually had to spend up front. You'll see shares of Applied Digital higher by 2.9%.
And up finally, AMD rising after its CEO predicted very high demand for chips over the next few years. Analysts also raised their price targets on the stock, pointing to more growth from AI agents. There's been so much conversation about that as of late. Shares of AMD higher by 2.3%. Those are your morning movers.
Thank you very much. Just a few seconds' time, we're going to hear from Jamie Dimon. I think the competition for capital is so important, considering the success of the banks and what Treasury yields are doing.
I think it's global too, right? We are ahead in this capex buildout, but there's going to be redundancy. India and China, we aren't all competing for the same global pool, but we are competing for the same chips, inputs, and capital goods that build these things. It's very interesting to think about the global competition that's probably ramping up now.
And J.P. Morgan very involved in India. We're really looking forward to this conversation. Again, pleased to bring you out of tech to London. It is Tom Mackenzie at the Tech Stars Conference in London, always the global banks bringing in a new huge of capital, ahead of earnings kicking off next week. We bring it to Tom Mackenzie and Jamie Dimon.
Always a great moment to speak to Jamie Dimon, Chairman and CEO of J.P. Morgan. This is the 14th year of the J.P. Morgan Tech Summit here in London. Of course, thank you for your time. This is an environment in New York, where we're seeing the Nasdaq potentially notching the third straight record, tech stocks powering ahead. We've got the fund-raising news coming from OpenAI. Investors still willing to put money to work, and yet we've seen the cost of capital increase. We've seen some AI names, spreads starting to rise. How much latitude do you see, Jamie, for further funding for this AI?
Thanks for having me here, everyone. Let's start with the good news. This conference used to be 20 people. Now it's 2,000 investors and hundreds of companies around the world. It is a very positive sign of tech's ability to expand into this diaspora, not just Silicon Valley. So that is a very good time. A lot of these companies, they're real. They're things that help mankind for hundreds of years. Debt financing is a short-term kind of issue. But look, rates are going up. Live demand for capital. A lot of government financing. In my view, a little bit expected. You know, if it goes up higher, it's a great risk. But yeah, it creates risk for all companies. It changes valuation. And then markets open and close, you know? There's no permanent state of affairs when it comes to markets.
We are seeing that increased competition with the capital. So layer that on top of the forecast around the capex spend for AI, $700 billion this year is the view from your team. What is the potential biggest risk to that forecast? Is it the buildout, monetization, the cost of capital, is it something else?
It's all of those things. When we went to in total, it pays off, but it would be better models, better semiconductors. There will be changing schedules, lawsuits about building data centers. Look, most of it will get done, probably where people want them as opposed to where they don't. They'll be used. AI creates a lot of value, so I'm not really worried about it, but you do point out, it is a lot of additional borrowing. There's normal capex borrowing. It's more like the commitment, but there's a lot of borrowing. And then the government is borrowing $2 trillion again. This is a global phenomenon, not just the United States. Yeah, there's a supply and demand of capital. If you thought there was a saving glut years ago, now there's not. But it could be a good thing if rates are going up, demand for capital, and then capital is used productively. The problem part is the government, it's consumption. That's a whole different thing. And then, of course, government spending can drive inflation, so it can be the flip side of how this plays out.
I want to get on to that, but you mentioned the politics of AI. What would your advice be to the frontier lab founders and to governments in terms of how to resolve the politics of AI and address those risks?
These are different issues. Data centers, build them where they're wanted. Half of them, half of the new ones in America, Texas and Virginia, and people don't want them there. You're not going to win. You get lawsuits. But there are a lot of states that would take it that have access to power. Any good company is a good community citizen. A lot of these people are doing it, they're being part of the community, helping the community get the rights. They make commitments that won't raise consumer electricity costs. It's just things like that. It will be worked through.
AI has huge positive effects. I do think it will cure a lot of diseases. It will stay back in composite materials. It will make life unbelievable for people. The downside is obviously what you read about with the agents and mythos and all these things causing trouble, and that's a legitimate concern. It's a real thing. I'm not going to get hysterical over is it existential or not. What we're doing is rolling up our sleeves and going to work to fix it. The banks have always had a system in place where we help each other. We also started a thing called the Alliance for Critical Infrastructure. It's starting with 50 companies. It's starting in the U.S. across six industries: tech, financial services, water, transport, these industries that their government points out as a lifeline. But eventually it should probably expand to healthcare, pharma, agricultural. I mean, every industry is kind of critical. It should also, we need to help the smaller companies too, because they have different vendors and different needs. It's a lot of work. We simply have to do it. AI created vulnerabilities we didn't know about, and we're always worried about cyber before these things.
You've thought about cyber for a long time.
It's our biggest risk, yeah.
Does AI make cyber systemic risks more likely?
Oh, yeah. Mythos, whatever you thought it was before, my chairman said, cyber is our biggest risk, and they didn't publish mythos yet. I would say it went up 10-fold after mythos.
I want to switch focus, look across the pond to France. What do you make of the bond selloff? What do you think of what you've seen from France and are you worried about contagion risk to other Eurozone countries?
Maybe a little bit. I'm not going to talk about France in particular. It's a warning to governments, okay? We can't borrow endlessly and spend endlessly, and it's been going on for a long time. If you look at debt around the world, Europe has tapped out, but America has gone to 100%. Countries around the world are borrowing money. And I think we can't be complacent. The lesson is there will be a point where the market will ask for more and more and more, and yeah, at one point, they'll feed into corporate debt and things like that, which is how it happens. I will say, the best thing to do is deal with it before it becomes a crisis. If it becomes a crisis, we will deal with it. It will just be in a much less pleasant way.
Some would argue we're a long way from that in France in terms of avoiding a crisis, although Le Pen has given details. Do you watch for contagion into the credit markets? Is that the transmission mechanism that we should be monitoring?
I think, yes. What you have is all businesses should prepare for different outcomes. I think it's a mistake to say here's my forecast, because you should be prepared for a wider range of outcomes. Intellectually, it's very good to think about it. You may think the odds are more than me or less than me, but I think there's a risk that inflation is sticky, rates continue to go up. For corporations, whether you leverage or not, when you have to refi or borrow money, are you prepared for higher credit spreads and stuff? So J.P. Morgan, we have to be prepared for it. So credit spreads gap out and rates go up, we're completely fine. But the reason we run it that way is we can continue to service our clients. We're not making bets on those things. We're serving clients through thick or thin.
On the U.S., essentially full employment, growth north of 2%, fiscal expansion, a deficit of 6%, record borrowing. Is that dealt with with financial repression? Is that ultimately what it has to come down to, or inflation?
Yeah, we don't know yet. I think half of what you said is good news. And here's some other good news. Corporate debt is not too much. Consumer debt is not too much. It's government debt. Government debt does fuel a little bit of inflation. It also fuels corporate profits. So I don't know how it's going to sort out. It doesn't have the financial repression. I think rational things make it better. I should point this out, because this may be any next op-ed. Could policy shrink? I think good policy in the United States and in Europe can drive growth 1% higher and it does not cost money. That is permitting, school education, deregulation, without creating any additional risk. Rational climate policy, you know, different immigration policies can drive growth. Approximately in almost every country, that 1% growth will start to drive debt to GDP down.
I want to ask about the Treasury markets. Ray Dalio says the Chinese, Japanese, are getting more cautious, they want to unwind more of their holdings. That pushes up potentially the long end, yields up further. Is that underestimated by the markets, the role of China in the Treasury markets?
No, because it's completely public, so it's not like it's not transparent. China has already gone to $700 billion, that didn't happen today. It's been going on for, I don't know, two years. Japan is a little bit different, because they have issues about the dollar and yen and how they're going to fund some of the growth. They may want to go different. But I'll leave that to the Secretary of Treasury about how to deal with that. Again, it's just supply and demand. The dollar is a commodity and bonds are a commodity. Interest rates are a commodity. There's a lot of supply and demand issues. So I'm not worried about it. But yeah, maybe it will cause a problem one day.
Inflation moves higher from here, given the supply chain, given the spending around AI. We are looking at a more inflationary world.
I don't know yet. Here's the way I look at it. I don't like predicting the future. There are good arguments that some of these things will eventually drive inflation down and drive growth, and growth is good. Growth can be non-inflationary. And it doesn't have to be inflationary, but there are signs that things are inflationary that we are doing, like spending money, remilitarization. Immigration problem is probably inflationary. I look at the possibility and probability. I think the possibility of it going higher is higher than other people. That's not a given. That's just a probability of that.
I know you don't want to predict the future. But markets are predicting another hike from the Fed this year, more than two next year. Does that seem reasonable given what you're seeing?
Look, the markets, markets, whatever they say, they've always been wrong, too. The markets are 40%. The Fed predicts, and they were wrong. And then economists predict and now it's gone from going down to going up. It doesn't tell you anything, in my view. I think they're reacting to short-term data. The thing that may drive inflation, long-term issues, like oil prices and wars and global deficits and things like that. So it's not clear. There are a lot of forces taking place here. I don't spend a lot of time guessing about it.
Record second quarter for J.P. Morgan. Your team also forecast pretty strong third quarter growth in terms of revenues.
I can't talk about the third quarter, yeah.
But you're seeing momentum from the team.
I can't talk about that. But I think if you talk about Europe, IPOs, M&A activity, pretty good. If you talk about United States, probably a little bit of slowdown in September. Like I pointed out to you before, the pipeline kind of opens and closes, particularly IPOs, particularly in leveraged debt. Corporate debt is not the same thing. So far, so good. But again, I always tell people that, so far so good is good, and that can go on for quite a while, but it may not. I'm always prepared for the may not part.
Also the 28th, there's speculation maybe they go for a windfall tax on banks again. If they do, if the Chancellor does go that route in the U.K., how would you reframe the way you look at the U.K.?
We've dealt with governments being inconsistent. I mean, the people should know, we already paid, we've been paying this windfall tax for 12 years. It lacks principle to charge banks more than anybody else. It will raise the cost of capital, and it will have consequences. That's not a threat. Oh, he's threatening. That is a fact. And you know, I love the U.K. I love the people here. I want the U.K. to succeed. That won't be the good part of it. That will just be another negative for people bringing capital to the U.K.
There's a debate, or there's reporting suggesting they might target the domestic banks. Would you welcome that, just the next particular banks?
I'm not in favor of things that lack principle. Tax policy should be fair and consistent. It's easy to say charge my friends over here, I think that's wrong. I wouldn't be in favor of something like that either. And the people, I don't know, but this has the highest tax rate for banks probably in the world. Capital formation, investment growth, that is what drives countries. It's a mistake to think that somehow the politics may be great, you have a big bank. But what drives growth is the financial system, not just banks, but venture capital, putting capital with people, inventing things, creating productivity. Government should be conducive to that. Companies have been very good at capital formation and better growth, America. Countries in areas that don't have good capital formation have less growth. And when you have growth, it helps all your citizens. It's not being done for the wealthy. It's being done for the country. I have very thoughtful policies around taxes and regulations and how to grow your country. Like I said, a lot of policy is free. It's not expensive to cut regulations and cut permitting, and all the things that everyone you talk about, you can talk to anyone in the street, and they know all these things don't work. Why can't we just fix them? That would drive growth.
I wonder where the midterms will leave us in terms of policy. Obviously polls get it wrong, but the polls are suggesting Democrats win the House, the Senate is even up for grabs. What should investors be thinking about in terms of the potential policy on the back of the midterms if we do get a lame-duck president?
I don't know. Look, sometimes divided government has been good for America, and presidents have to start doing deals that are in the middle so you get agreement. So if you study it, it's not always bad. You know, President Trump, like the art of the deal, hopefully he's going to do some things that both sides can agree on. I'm hoping they focus on that afterwards. Get some good stuff done for the United States of America. That would be great for us.
Can I ask you one final question? If you were to advise a nephew how to invest your nephew, what advice would you give someone?
I'm not going to say this on national TV or global TV. It's not about guessing. The best advice is learn how to invest. Don't put all your money in this or that. Do it over time. Get good at it. And get used to the fact that markets go up or down. If you think you can time it, you're probably making a mistake. If you buy a good company and the stock goes down 15%, don't panic. Be very thoughtful about it. Be more of a long-term investor than trying to game the market all the time. If you try to game the market, you are guaranteed to lose money.
Jamie Dimon, CEO, J.P. Morgan, thank you very much indeed. Guys, back to you.
Tom, fantastic conversation. Thank you so much. Tom Mackenzie sitting alongside Jamie Dimon. Mike Ball and Herman Chan here. Mike, let's start with the macro of the moment that they spent some time on. The way higher yields finally start to crack things is the transmission through corporate credit, that when companies go to refinance, he says, will they be prepared for higher rates?
This is the concept of tightening. It's interesting, he didn't talk about the curve we're seeing right now, which is hurting his particular lending business. But he's not wrong. It was a lot of macro. We were crossing channels as far as the regulatory regime too. It was interesting to hear his thoughts on the excess tax, and he's right, because this is a capital competition. So anything, even if it's on the margin, that hurts your ability to raise and sustain capital, is going to make you disadvantaged for this giant AI capex buildout. As far as the other infrastructure, the military defense buildout, all the other things, it's a long list.
Herman, ever the diplomat, how much have you been paying attention for increased taxes?
Yeah, Jamie has been pretty vocal about trying to steer the conversation away from Texas and the U.K. It's something that he mentioned very frequently as basically non-competitive. You heard his comments, whereas the transmission system for the entire economy, and it has negative repercussions for capital formation and growth for the U.K.
Herman, he didn't want to talk about Q3, and fully understand why. We're not there yet. But what are you going to be looking for? Beyond a sense of the M&A side and the market-making side, but provision, some of this is what we're seeing in junk bonds, kind of trickles of consumer stresses and some of the other things, what are a few metrics on your mind?
The third quarter is mid-teen to high-teen growth in investment banking and trading. That's great. He did mention some slowdown in September. That might factor into the guidance. The guidance that I'm mentioning was sort of in between September periods, so there could be some negative repercussions from that. On the credit side, universally, the banks have been really benign in terms of their comments on credit. They talked about higher spending across not only gas, but also non-gas areas, like entertainment. They also talked about lower delinquencies across the consumer portfolio. So at least through the third quarter, things seem like consumer and credit quality in general is holding up pretty well. We'll see how it shakes out, given some of the newer developments over the fourth quarter.
I remember in Q2, just switching gears, we had the Bank of America CFO say there was a K-shaped economy, and they were actually sticking to that. The credit card data, we see it more in the spending data. Do you think we're going to see something similar from Jamie Dimon, or not Jamie, but his crew? Because I think you're right, I think we still have time here before we have a day of reckoning from higher prices.
You mentioned Bank of America. They talked about the lower half of the K economy growing faster than the upper half most recently. I think that's what we're seeing from the data side for now. But we talked about these higher rates and the transmission and how that affects the global economy. It will take it.
Thank you so much for joining us, Herman Chan of Bloomberg Intelligence, breaking down the comments from Jamie Dimon. Let's get to your markets, as we open the bells. We are going to hit another all-time high with the Nasdaq if we close with any sort of gain, or close to the S&P. We have to gain 0.55% in order to get to an all-time high. Ringing the opening bell down at the New York Stock Exchange is the Empire State Realty Trust. They're celebrating 48 years of the observation deck run-up. I think that's when you run up the Empire State Building, which Godspeed to anyone who does that. You have stronger legs, more stamina, and more grit than I have.
Down at the New York Stock Exchange, we have NeoGen, which I assume is a biotech company. Constellation Energy, one of the biggest gainers to start your morning. Google is locking in more nuclear power for its growing AI needs. It signed a 20-year deal with Constellation. Constellation plans to invest more than $4 billion for the deal, adding about 900 megawatts of new capacity to the PJM grid.
We just heard from Jamie Dimon talking about sticky inflation, momentum looking good for the banking sector. But things are good. Might they change? Let's bring in the CEO and CIO, Nancy Tangler. Next week, the big banks report. Jamie Dimon was very careful not to front-run those. But banks have gotten beaten up recently after being the darling of this market, concerned that maybe some of the up-up and capital markets activity is starting to slow. What is your view on financials right now?
I think it's an opportunity. We own both Goldman Sachs in our 12 Best Ideas portfolio and our ETF, and we own J.P. Morgan in our portfolios. I think you want to be in the non-interest-rate-sensitive banks and providers. We also have Morgan Stanley. You use the weakness, and that's what we've done. The IPO market will return. I think there's company-specific issues that have caused some of the IPOs to be pulled. Rising interest rates, I think bankers are trying to see where they settle, but all in, I think you want to use this weakness as an opportunity.
Sticking to the banks, we've been talking a lot about M&A, IPOs, all the capital raises, and we understand the market-making as far as trading. Wealth management, it seems it's getting a little disrupted here by AI. The younger generations are turning more to easier answers online than traditional businesses may suffer. And there's more competition. What are your thoughts there as far as the wealth management front?
That's a great question. The great irony is one of the main drivers of CPI, sorry, has been the portfolio management fees. And so I think we are seeing growth. That's driven by the market. I sat on this air probably five years ago, and we were discussing how millennials would never buy homes, and in fact, they did, and minivans eventually. So I think you'll see as individuals' wealth accumulates and grows, that they will be more interested in seeking advice. You know, the disruptors, God bless them. I think Robinhood has done a lot for investing, particularly with the younger generation. So I'm not saying that will go away. I just think you'll see a shift in companies like Goldman, like Morgan Stanley will continue to accumulate assets.
It's hard for the retail investors not to keep jumping in on a day like today, when the S&P flirting with all-time highs. We're now four points, five points or so away from another all-time high. It is a remarkable market. Bond yields are at multi-decade highs, and this equity market keeps chugging along, and the reason many pointed to is expectations for strong earnings. Nancy, how crucial is this earnings season going to be?
I think it's not just the earnings season, Dani. Right question. We'll probably see earnings growth, I'm seeing numbers 30% to 32% in Q3. It will be about the guidance. And I think we've got a little cheat sheet with Micron's earnings growth, or earnings report. They showed the AI trade is alive and well and will sustain for some period of time the capex trade. I'm going to be listening for guidance. I'm going to look at margins. We're at historic highs for operating margins. You know, we saw the hand-wringing over Micron's margin declining to 86%, 86.3%. I'm going to take all of that and then say one more thing.
Rising interest rates, the 10-year at 5%, should not be prohibitive. In the 1990s, we averaged 5% to 8% on the 10-year. Those of us with some years under our belt would argue that rates are normalizing, and what matters is why. Why are rates going up? Growth is fantastic. It's a return on capital trade, in our view. If you can borrow at 5%, 5.25%, 5.5% and generate a 20% return, as a corporate CEO, that is what you should be doing. There's an insatiable appetite for bond offerings. We see that with pension plans and state funds, and that will continue, we believe. Last thing, retail investor, we used to call them dumb money. They are the smart money. They've been driving this market up, and when they get weary, the buyback takes over. So I think we have some room to run for the fourth quarter and into next year.
Just to follow up on that, obviously the macro picture has sort of compressed multiples. Also single stocks, especially certain pockets that are almost outright contractions and corrections. What do you think it will take to get this multiple expansion? Obviously we know the earnings story is the driver, but the macro seems to be getting in the way.
You're absolutely right. Stocks have gotten cheaper since January, ironic, since we're hitting all-time highs. I don't mind multiple compression, because it tells me that this bull market is sustainable and it elongates it. I think what we want to hear, and the skepticism is good. In the 1990s, there was no skepticism. It was all euphoria. So I kind of like where we sit for this bull market, and earnings growth does ultimately drive stock price performance. So what I'm going to do in the fourth quarter is continue to enjoy the technology names that we added to in the summer. You guys were talking about Nvidia earlier. We put it in our value portfolio during the summer swoon, and we're very happy we did. So I think you want to use, hold on to those names going into year end, and then start looking for where you want to broaden out as we enter into 2027.
We talked about financials. Anywhere else you want to broaden out, Nancy? In the last quarter, it was an incredibly difficult market to broaden out. It was really only a few names that held up this index with the majority of sectors falling over the past three months.
Yeah, it was a gruesome period. I've been doing this a long time, and it was hard to get your sea legs, because we saw these daily shifts in the narrative, and then, you know, big moves in volatility. Again, you used the weakness that we saw during the summer. The industrial names did not perform well. We were adding to a number of those. We wrote a piece called The Indispensable Infrastructure. You want to own the names that are going to build out the grid, the chip names still a lot of life, we believe. And then you want to look at names in healthcare, where they will be beneficiaries of the AI buildout. We have yet to see what kind of drug discovery we'll enjoy in record periods of time. So we added to a number of those things, J&J and AbbVie and Lilly, but I think that is the space where you want to pick off some of the higher quality names that really also didn't do very much. I mean, Lilly has had kind of a flat year after years of dramatic outperformance, but the earnings growth is still pretty robust. So that's where we're looking, adding to names like Micron, we've been doing that all summer. Meta, put that in our value portfolio. So these are some of the areas I think you can't -- Meta is a broaden-out trade, really, because they're indicating now that they can monetize their AI capex spend with news. So I think it's a really interesting time to get in. I've liked the name for a long time, and we moved back into it.
This idea of monetization and productivity gains, is this going qualitative? Are we starting to get an idea how to wall at a time this? We go into the new earnings season, how do we equate the spend working down into actual earnings? What are you looking for there?
Yeah, that's also the right question, Mike. I think we saw it last quarter. The beginnings of it with Microsoft and Amazon, where we saw some of the capex being monetized in cloud growth and in AI spend. So that is what we're looking for. There will be winners and losers in this space. I think the jury is still out on Oracle. They're very dependent on -- which, by the way, we own, but it's not a major holding for us. And we're constantly reassessing it. We're going to wait for the investor day. But they're very dependent on OpenAI in particular, and I think there's some problems there. I think the IPOs were pushed for a reason. I think I'm going to call it nonsense around the end of humanity was a bit of a smoke screen, all the while they were introducing new models. So I think investors should sit back, and Microsoft seems pretty well poised because of their dominance in the enterprise space. The product isn't as good, but you only have to go back to VHS tapes and Sony Betamax. Sony was a better product, but VHS captured the mind of the consumer. So I think you could see some growth in Microsoft that's unexpected.
And Microsoft, again, on the back of a really strong quarter. Nancy, on that point of the concern over AI being a smoke screen, why do you think we went through that whole thing then? What was it all about, this fear, and even from the CEOs of these LLMs, to your point just voicing them, maybe not acting on them?
Right, Dani, when I was a kid, they used to have us hide under our desks. It was called duck and cover in case there was a nuclear bomb dropped. Even in first grade. I did not really get how my desk was going to protect me. But the end of the universe has been proclaimed and predicted for generations. I think what Nvidia announced this week, and mostly went unnoticed, their new software platform that will allow developers to build programs to quarantine rogue agents, it's called Open Agent Safety Platform. That is innovation, corporation solving problem. We could put more regulation in place, but the Congress has not done a very good job, no job, at regulating internet, crypto. So I think we want to, you know, certainly have eyes on it, but have the experts rein it in. It's in their best interest as well as ours. I just think it was -- I don't know the purpose. I'm not that Machiavellian, but the timing was not coincidental, I don't think.
I think a lot of people would agree on that point. Nancy, thank you so much for joining us. Let's check your equity markets, more than 10 minutes into your trading day. Finally a day where we are up and breadth looks good, and wouldn't you know it, we are trading just at an all-time high, like literally we are there if we close at this level, this is where the market hits an all-time high. It's already the second day in a row of the Nasdaq hitting all-time highs. Nvidia, Microsoft, Nancy was saying what a good stock this is, off the back of its best quarter. Marvell is having an investor day. The CEO may be saying things that investors are liking. Constellation Energy, a new deal with Google. And Seagate Technology, a semi that's been beaten up, rallying, it's had a lot of volatility over concerns of it competing amongst others. Some of the other chip stocks also not doing so well this morning. Energy is also down. And in fact, energy, one of the few sectors in the negative this morning, as the price of oil comes in below $100 a barrel. Communications is also little changed. At the top, you'll see utilities. That is Constellation. That gain, thanks to the Google involvement, followed by industrials, healthcare, info tech, real estate rounding out the best, but pretty broad-based gains to start your day. Coming up, the top calls from analysts this morning. We hear from the sell side next. This is Bloomberg Open Interest.
Let's get top calls. Here's Norah Mulinda.
Hey, Dani, first up, Lockheed initiated a buy rating at Rothschild. The firm says military spending rising around the world, giving changes in modern warfare. Meanwhile, Nike is being cut to hold, saying the company appears to have accepted a smaller position in the sportswear industry, and the firm expects another 19% drop in shares, this as competition grows and China remains a key challenge for the company. The stock got hit last week after disappointing sales and a tough outlook. Finally, Citi upgrading JetBlue to $4 a share. There's not much room left to fall for the stock. The firm does prefer those major airlines over the traditional low-cost carriers. Those are your top calls. Dani?
Norah, thank you very much. We'll catch up with you in the next hour. Coming up, it happened, Paramount, the mega merger is finally closed. They're now shaking up the leadership team at Skydance as merger completes. We're going to discuss it. That's coming up next. This is Open Interest.
Welcome back to Open Interest. A check on your equity markets, trading at all-time highs. It's remarkable, we just need to get to 78.16, and if we end here, we will surpass all-time highs. The Nasdaq looks poised to do it, even with the pressure over recent days, weeks on higher yields. The Russell and Dow all looking strong. It's broad-based gains to all-time highs, which I'm sure many people will see as a relief. Relief in bond yields. Those are moving down, likely because of the help from Brent crude. Brent crude down 0.2%. Recent reporting suggests the Saudis are pushing back against the Houthi rebels and getting close, if not already captured, a city near the Red Sea. That's bringing optimism into this market. Some of the individual companies, Nvidia just marching ever so closely to that $6 trillion valuation.
Speaking of valuation, the rally in SpaceX means that Elon Musk is a trillionaire yet again. Alphabet lower after signing a big deal for nuclear power from Constellation. Shares up 13%. And finally, it has happened. The acquisition of Paramount to buy Warner Bros. Discovery. Skydance is down 2%. It finally closed, just moments ago this morning. We spoke with the former head of MTV, Michael J. Wolf, on the deal.
They have so much opportunity and so much runway ahead. If you look at the U.S., for example, they're 12% of all television viewing. It's only exceeded by YouTube. Interestingly enough, they're less than 8% in all streaming.
What does the road ahead look like? Joining us for more is our media reporter, Hannah Miller. Hannah, they've gotten the deal done. There were some concerns, the pushback, legislation. What does it take now to not only close this thing, which they have now done, but make it a success?
