bullish? absolutely not. demand is softer, and opec is doing a phenomenal job in actually keeping the market in balance because we do have higher supply, but i don't think -- >> amrita,i'm sorry to cut you off. energy aspects, thank you. happy new year. all right, make sure you join all three of us tomorrow. see what we're going to wear. "squawk on the street" is next. ♪ good thursday morning, and welcome to "squawk on the street," i'm sara eisen with bob pisani today live from post nine of the new york stock exchange. carl, jim, and david have the morning off. take a look at futures right now. as we just continue this win streak, we're right in the middle of the santa claus rally. looks like the dow futures are pointing to a lower start. everybody else is higher. nasdaq futures up 45, s&p futures up a bit. we're less than 0.3% away from a record closing high. we'll see if we can get there

today. our road map begins with that record watch. s&p inching closer to all-time highs as the santa claus rally rolls on. the dow and the nasdaq 100 hitting their own records. plus, tesla shares at a three-month high and seeing the third best year on record, but will waning ev demand prove a headwind for growth in 2024? why one analyst thinks a.i. will become microsoft's iphone moment in the next few years. we'll begin with targets, though, including record highs for the dow and the nasdaq 100. it's been a powerful, somewhat surprising rally, fueled by lower interest rates. we continue to see new si cycle lows. >> 4.8% right now, i believe, on the ten-year. >> yeah. >> somewhere -- 3.8%, excuse me. the important thing here is 4,793, that would be the closing high of january 4, 2022, for the s&p. we're very close to it. fractions of a percent. that's the remarkable move for the year that we've seen.

i think this time last year, remember, we were preparing for a recession. everyone was expecting it. everyone was expecting an earnings recession. there were people who had 200 on the s&p 500 for the earnings estimates. we're going to end the year close to 220. we have $245 on the s&p for 2024. so, the consensus was completely wrong, and i think two things happened that were quite amazing. one was the magnificent seven stepped in. a.i. became the predominant paradigm, the biggest paradigm since the internet, essentially, and number two, the recession never came. the recession never came because the federal reserve essentially reduced inflation without dramatically slowing the economy. i think that is a remarkable story. it's extremely rare. you and i both know, sara, soft landings are very rare animals. and that is the main story of 2023, in my opinion, the fact that we did not have the recession. who knows if we'll have one in 2024? but the point is, if you would

have made a decision based on a lot of forecasts in 2023, december 2022, you would have been making a lot of big mistakes, essentially staying with the market was the smart thing to do. >> and i think in the last few weeks, as it relates to this latest rally, which just got super charged by the a.i. rally of 2023 and the lack of recession, really i think the surprise is how fast inflation has come down, the disinflation story that has allowed fed chair powell to pivot and has allowed the ten-year yield to rally. i was just looking at the lows since july that we hit last night is 3.79% on the ten-year, and we're just above there right now. >> and we were 5%. >> the dollar's been weak. it's going to have a first down year since 2020 on the back of some of the weakness that we've really seen since december. all of these trades got super charged, and the question, i think, for 2024 is, will inflation still come down? will this trend continue to be the friend of the fed and of investors? and will the economy stay soft

but not in recession? we got jobless claims today, a little bit of a tick up, but nothing worrisome. it's a holiday season. so, these weekly claims, first-time claims, can be a little bit volatile. continuing claims, a little bit elevated as well, but nothing speaks to stress or any kind of mass layoffs that companies are doing right now, which also, i think, bob, speaks to the fact that there's demand. >> there is a lot of demand out there. the question now is, what could go wrong in 2024? and the way i always look at this, you take the pain trade, the consensus views, and invert them, especially when they're all lopsided. in this case, we have a very bullish consensus, by and large. the first thing is we're going to get a lot of rate cuts. there's your first pain trade right there. fewer rate cuts than expected happen in '24. >> aren't we expecting 160 basis points? >> i think 150. six rate cuts starting in march. that's a lot. and if for whatever reason we get the economy unusually strong or inflation doesn't go down enough, the fed doesn't cut, in

the order and sequence expected, that's going to be a hiccup. the second is we get a bigger slowdown than people anticipated. by the way, both these things could happen. economy still slows down, but the fed doesn't cut rates. that's a worst case scenario, but it could happen. finally, the earnings slowdown. i'm not particularly impressed with what i see early on with the early reporters for the fourth quarter. the revenues are generally below expectations. we had a lot of disappointing revenue reports. we see a little bit of disinflation, a little demand reduction going on, and that could be -- revenues could be a story for 2024 if the economy softens significantly, we get disinflation, companies can't raise prices the way they did in 2023, revenues could be a big issue. there's your three trades that are pain trades. fewer rate cuts than expected. the economy goes into some kind of modest recession, and we have a bigger earnings/revenue slowdown than anticipated. >> i think, also, the mag 7,

which has been a key theme of this year, these seven stocks, their surge accounted for two-thirds of the s&p 500's advance, so even though we bought in doubt in recent weeks to places like the russell 2000, to biotech, to everything left behind, the food stocks, the losers, it's really all about these stocks, and i think if we continue to have the soft landing trade and the better economy, and the fed start cutting rates, do these stocks become as attractive? they're also safe havens. they've got good cash flows and strong earnings power. will they continue to power this market? >> i thought it was amaze, just a plug for our delivering alpha survey. we asked our investors, what is the best way to invest in a.i.? 57%, big tech companies. which sectors might outperform? big cap tech is further down than you might think. only 15% say mega cap tech will be the top performer in 2024. that was shocking to me.

35% say bank stocks. they're sort of doing a reversion trade here. 23% say high-dividend stocks. that's certainly not mega cap tech. 19% say health care. these are all stocks that generally underperformed in 2023, so it's a good call. it's a mean reversion call, but you think a large percentage would say, mega cap tech is going to repeat? no. only 15%. i think that's a very interesting call that you had. most people would be shocked. this time last year, nobody, and i mean nobody, thought nvidia was going to be up 220% in 2023. >> nobody thought we would have a regional bank crisis either where we had a few failures, including svb and managed to come out of it with financial stocks as the top pick for 2024. i mean, the regional banks did underperform this year, and i think a question mark for that group is, commercial real estate exposure. and if that starts to -- we still have higher rates than where a lot of these -- where a lot of these buildings locked in their rates, and if they have to refinance, that could mean a wave of pain, defaults.

>> we've been talking about this for months, it's in the market to a certain extent. it would really have to -- there's a lot of defaults already built into commercial real estate for the regional banks. i think you would have to have a much, much worse scenario for it to collapse further. >> ed yardeni -- all the bulls are out because the rally's broadening out. he says, "we conclude that the rolling recession for goods producers and distributors may be bottoming but has yet to turn into a rolling recovery." that could be a catalyst for the market, too, if we actually expect momentum to be picking up, and i -- you know, if you look at the goldman-sachs economic forecast, they expect consumer spending to be better. they expect growth to come in better at 2%. that's not what people were expecting at this stage of a fed tightening cycle. >> why can't we get consumer sentiment higher? the market is telling us that the economy is still in good shape, and yet, the investing public doesn't seem to be believing it. it's remarkable to me there's a disconnect between the markets and what the general public seems to be believing.

they seem to think inflation is still out of control and that the economy is slipping into a recession, and the market doesn't believe it. i don't think the economic evidence is there. the economic evidence is inflation is coming down, and the economy is holding up pretty well. and yet, vast numbers of the public don't believe this. >> i think it's going to be an issue for the election in 2024. no question about it. the idea is that while inflation is coming down, inflation rates are still higher than they were pre-pandemic. people still feel that acutely. all the excess savings that we got during the covid run-up, those have come down. student loan payments have resumed. s.n.a.p. payments, the extra food security benefits, they are expired. all these things add up, and for a lot of the population, it still feels painful. that's the best explanation, i think, we have, that and the fact that shelter prices, which are a big component of what we spend on rent, on housing prices, still remain very elevated, and that's been a problem for the fed, and it's

been a problem for that stubbornness. >> we all know that's a big lagging indicator. the other components that look at this indicate that the shelter component costs are going to go down in the first half of 2024. >> i'm not sure. mortgage rates are falling pretty fast here. what if it's -- we had money movers yesterday from apollo. he says, financial conditions are loosening so much right now, look at stocks, look at yields, look at the dollar weak ening, and look at mortgage rates coming down. if that's the activity, we'll get inflation flaring up that the fed may feel they have to be higher for longer after all. that's a contrarian call, for sure, but it's a risk as we continue to talk about the market going up and bonds going up every single day. >> yeah, it's a great -- we should have these problems, though. the s&p up 25% going into the close of the year. these are problems that wealthy -- that fortunate investors have. oh my gosh, we're up 25%, what could go wrong? this time last year, we remember

down 20%, and we were wondering -- we were going into a recession. i'd rather sit here than sit in december this moment one year ago. >> the biggest risk is consensus is wrong again, which usually happens. when we return, fidelity will join us with his market outlook, including what he believes will have to do the heavy lifting in 2024. taking another look at futures here, as we march to the final days of the year, the quarter, and the month, dow futures down 36. nasdaq futures remain positive. futures were soft yesterday as well, and then they steadily increased throughout the day. we're on record close watch as well for the s&p 500. 20 points away. stay with us on "squawk on the street." when you think of investment risk, do you consider climate risk? changing weather patterns are impacting the way we live and the value of businesses large and small. this can mean disruption to supply chains, changing demand for products and shifting regulation.

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welcome back to "squawk on the street." we've got new results from our exclusive delivering alpha survey. when asked about the biggest risk to stocks in 2024, the top two answers from our respondents were stubborn inflation and problems with commercial real estate, good things to be worried about. joining us now to discuss the market outlook for 2024, fidelity investment's director of global macro. happy new year. good to see you. you see our survey results here. biggest worries, 23% say stubborn inflation. 21% say -- 23%, stubborn inflation. 23%, problems with commercial real estate. 21%, slow economic growth. how about your list of worried items for 2024?

>> well, you know, that survey describes perfectly kind of the roller coaster of tail risks that investors have to navigate, and we did that this year. if you think of the distribution of all outcomes, it's a bell curve. the middle is goldilocks, where we seem to be right now. the left is a recession. the right is higher interest rates. and we started the year, you know, fearing the left curve. remember the inverted yield curve. that was going to be the other shoe that was going to drop in 2023 after the rate hikes in 2022, and then by the middle of the year, we were worrying about, you know, not necessarily overheating but higher rates, you know, the ten-year pushing 5%, and now we're back in the middle, and so your survey perfectly encapsulates how investors have to traverse around that bell curve from one extreme to the other, and you know, we're in a good place right now, but i wouldn't

dismiss the possibility that in 2024, we're going to be kind of riding that bell curve yet again. >> yeah. sara and i were talking about another risk, which is fewer rate cuts than expected. the fed's, you know, we're anticipating 150, 160 basis points in rate cuts in 2024. that's, what, six rate cuts, essentially? if inflation is a little bit higher, the economy is too strong, that may not materialize. to what extent is that priced into the market, and would that be a problem if it didn't happen in the sequence that the street seems to believe it's going to happen? >> yeah, so, i think it makes sense for the fed to give back a few of its rate hikes in the same way that alan greenspan did in 1995. you remember those days, bob. greenspan hiked rates 300 basis points in '94, gave back 75 in '95, and we had a soft landing, one of the few in history, and the market rocketed off, 37% in 1995 and went up for, i think,

five years straight. i believe it was. so, maybe the market is hoping for a replay of that, and i think a few rate cuts make sense, because inflation has fallen. i think it's likely to be sticky around 3%, and as you mentioned earlier, super core is still around 4%, so i think those last hundred basis points are going to be hard to get. but with inflation falling somewhat, the fed can give back some, because it's spread over that inflation rate, then, starts to go up in terms of where the fed is. but i think six or more rate cuts, i think, is quite unrealistic, unless we get a recession, and then we have other problems, because then your earnings side is not going to hold up, and then the market will have some issues. but i think a few givebacks make sense, but the market being the market, you know, the market's like a spoiled child. it gets a few, and it wants more, and that's a very typical situation that we're finding ourselves in right now.

>> i'm looking at your forecast on bond yields, 4% to 5%, and you say the risk is to the upside around 5% if fiscal issues come to the fore, which, you know, it's an election year, and we've already got a little taste of that in 2023. so, can the stock market rally with bond yields not moving south anymore? >> i think so. i mean, the move in the ten-year below 4%, i don't know that that makes a lot of sense. there may be some position squaring, some window dressing going into the end of the year, and certainly, there was a big short squeeze if you look at the traders data for the two-year. that was at a record short going into kind of the peak fed, if you will, so i think some of this is exaggerated, but below 4% to me doesn't make a lot of sense. i think, you know, 5% was very attractive. 4% is probably more or less the floor. and so, if we're between 4% and 5%, i think the stock market will be okay, but as i said

earlier, if we're traversing that bell curve from left to right and back to the middle, at some point next year, we may have a repeat of what we had this year where rates go up and, you know, the analysts plugging earnings and rates into their discounted cash flow models start to come up with lower valuations, and i do think, you know, i'm bullish. i think the market is going to broaden out, potentially in a bullish way, because typically, when the market broadens, it also goes up. but there are a number of questions, and one of them is that valuation-wise, a lot of this actually is priced in. the pe 14 months ago at the october 2022 low was 15.3. today, it's over 21. so, a lot of this is priced in, and so in that sense, earnings will have to do the heavy lifting in 2024, but you know, the open question, i think, is

one where if we see a rotation from the magnificent seven to everything that's been left behind, and i do think that that is very likely, what kind of, you know, absolute trend does that produce? when 30% of the market gets rotated into all the cats and dogs that are on the 70% side, how strong can the index actually be? and i think that's one of the open questions for next year. >> yeah, biggest technical problem right now is the market is not terribly attractively priced. it's expensive. forward pe. earnings outlook up 11%. that's a lot to ask for the markets here. thanks very much, jurrien. when we come back, it's a stock that's down 10% this year, but one analyst at b of a has made it his top pick for 2024. plus taking another look at futures here. dow and nasdaq 100 closing at a record high yesterday, and it looks like we're pointing to a higher start now. dow is lagging a b.

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well, while stocks have been chasing history, different story for natural dpgas. prices down more than 30%. pippa stevens joins us with more. >> hey, sara, this is really a case of what a difference a year makes, because last year, energy prices were high, and everyone was talking about a potential energy crisis in europe. that didn't happen, and prices have since tumbled, including here in the u.s., where nat gas is pacing for its worst year since 2006. mild temperatures throughout the year cut fuel demand and output has stayed around record levels, meaning the market is now oversupplied with storage 8% above the five-year average.

production is so high in part because of associated gas. that's gas produced alongside oil. crude prices are still above break-even levels so that's stimulating associated gas production. in total, it's about 15% of domestic supply. but the surge in lng exports does provide a floor of sorts for prices, even with lower domestic demand. during the first half of the year, the u.s. was the largest lng exporter worldwide with more than half heading to europe. new export sites are being constructed in the u.s., which should keep demand high. and looking ahead, the eia cut its forecast for henry hub prices, now predicting they'll average $2.80 throughout the winter heating season, which ends in march. that's about 12% above where we are right now, but sara, pretty shocking for the worst year since 2006. >> absolutely. and a savior, i think, another one for saving grace for europe, that is. pippa stevens, thank you. the opening bell just a few minutes away. "squawk on the street" will be right back. to duckduckgo on all your devie

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look at microsoft shares rising premarket, up more than 55% this year. wedbush raises its price target on the stock to $450 from $425. analyst dan ives citing what he calls incrementally bullish recent a.i. customer checks, add, "we maintain our outperform rating and microsoft is on our wedbush best ideas list into 2024. we view this as microsoft's iphone moment with a.i. set to change the cloud growth trajectory in red monld over the next few years. we estimate it could add another $25 billion to redmond's top line." >> first off a shoutout to dan ives. he was much hridiculed this yea for his endlessly bullish commentary, which was correct, it turns out. also for his amazing sartorial outfits that he has, those lime green psychedelic blazers. he was ridiculed for that, and we love him for that too. he was right.

kudos to him. the amazing thing to me is people will loament that this i an overplayed story, and yet when you look at the earnings expectations for a company like microsoft, they're not overvalued. none of the magnificent seven are ridiculous. tesla is in the 60s on its forward, but that's been there for many years. that's an exception. you look at microsoft. 2024 earnings estimates, 28 times 2024 numbers, a multiple. it's traditionally right in the 25, 26, 27 forward earnings, so nothing is stupidly overvalued where you can say, oh, everything's gotten out of control here. by the way, the same with apple. same situation. also sitting around in the mid-20s. meta, same situation. none of these companies -- the amazing thing is even with up 55% on the year, as you said, the earnings expectations have risen to meet that, so the multiple is not dramatically expanding, and that's a testimony to how much confidence the street has in the

transformative ability for a.i. and the earnings power. >> ifind it interesting that apple and microsoft are the worst performing of the top magnificent seven. nvidia's right there at the top. >> 220% it. >> meta is number two at 197%. tesla, amazon, alphabet, microsoft, and then apple. but again, they're all huge winners on the year. here's the opening bells at the realtime exchange. here at the big board, she's the first global nonprofit, providing equal access to education for women. over at the nasdaq, buildgirls.com, empowering women to pursue careers in architecture, engineering and construction. good pair of nonprofits there ringing the opening bells. as we open, bob, just looking to see whether the santa claus rally can continue. it has a pretty good track record, right? we're right in the middle of it. >> we closed thursday night. it started friday. i believe we closed 4,746 on the

s&p, 4,789 right now, so we're heading towards almost up 1% since the start of that. again, the santa claus rally, last five days of the old year, first two of the new year, average gain is 1.3%. we are almost exactly on target. we're close to 1% since the close on thursday on the s&p, and i want to note here, sara, 4,789 right now. remember the old closing high of right around 4,793. that was, what, january 4th of 2022, so we are knocking on the door. we may end the year at an historic high. wouldn't that be something to close it out? we were talking about the magnificent seven in 2023. nvidia, $236. meta, 196%. tesla, 112%. there are a lot of complaints about this, and i wrote about it in my trader talk today about how overwhelming this has been. i find most of these arguments not convincing. a lot of companies have benefitted from the a.i. story. but if you look at companies

like any of the semiconductor names, amd, for example, up 123%. huge moves. any of the cloud names, cloud storage names, other ones besides amazon or meta, everson networks, for example, up 96%. cloudflare, another one in the cloud space, up almost 90%. so, cloud names -- >> cadence design. they make sum coemiconductor de. nvidia is a big client. there are a lot of names that don't get a lot of love or mention, but they're huge winners. cadence designs, up 71%. >> this happened with the internet. once you had the big names, netscape went public in august, '95. i was here for that. don't laugh, please. it created that move. within a few years, knock-on effects, huge numbers of other internet companies came online. this is going to happen next year. the a.i. story is going to broaden out, other smaller

companies, watch dan ives, he'll have his eye on all of those companies out there that you don't know much about right now that are microcap or small cap or going to go public in the next year around the a.i. story. a huge part of the ipo story is going to be a.i.-related stories going public. >> i do wonder if it extends to other sectors, places like financials, for instance, that are going to benefit from using generative a.i. to improve productivity and boost margins. i wonder when that story happens. >> look at the back office. look what software as a service did, the back office functions, how it made them much more efficient. a.i. is going to do that again on steroids. another objection. the valuations are crazy. i showed you that's not true. the major, big tech companies are not having stupid valuations right now. the other thing i want to point out, you mentioned this, sara, the influence of the magnificent seven has declined since the interest rates started dropping in late october, early november. the big story is, look at small cap values have been rallying. that's the leader. small cap values, up 25% since

the beginning of november. the russell 2000, up 24%. big moves up here overall in the markets. these are quite remarkable, and you also look at the equal eight up about 16, 17%. all of this is happening because of the decline in interest rates and the ability of the market to broaden out. the equal weight s&p 500 went from a 52-week low to a 52-week high in just a few weeks. i mean, i've been doing this 26 years. i've almost never seen that. you don't see a major index just go round -- here's some of the numbers here. this is the market leadership right now. small cap value. who on earth -- by the way, historically, we know, over time, small cap tends to outperform big cap. value tends to outperform growth over long periods, but when is it -- when this is actually happened recently? well, maybe a little bit in 2020, but not recently. there's your leadership. >> that's the sauce. >> that is exactly the soft landing. the nasdaq 100, which, by the way, is at an historic high, is underperforming here, although underperforming is a relative

term here. you see it's doing great, actually, and there's the s&p. so, here's this endless whining that the magnificent seven has taken over the stock market. it's not true. what we needed was for interest rates to come down and make the market a little more attractive for broader groups of people and be convinced that the soft landing is real. >> but the question is, does the broadening out continued? there are plenty of left-behind sectors and stocks, even with this v-shaped recovery that you're talking about in places like small cap. i was looking at some of the health care stocks. health care is an underperforming index so far this year. if you look at the group. it's basically flat on the year. that's just thanks to a little bit of a rally. if you were not novo nordisk or eli lilly, it was a tough year. there are signs that things are looking up. there's been a bunch of m&a lately, so that could help biotech valuations. interest rates are falling. that's an interest rate sensitive sector when it comes

to raising capital. no question about it. those are some potential tailwinds. if you look at some of the biggest losers in the health care space, pfizer and moderna. >> yes. >> big covid winners. >> and bristol myers, tough year. pharma has had a tough year overall, and if you look at the laggards, it is very rational here. i just want to point out, mpeope of our survey here, give another shoutout to the delivering alpha survey here, the top performing areas in the u.s. in 2024, 35% say financial stocks, which are underperformers. 23% say high dividend stocks, another underperformer relatively. 19% say health care. you just mentioned. only 15% say mega cap tech. i find that to be remarkable. they are saying, essentially, there's going to be mean reversion. underperforming stocks will tend to outperform. that's a tough call. >> it's also hard to get excited about a stock that's up, i don't know, 200% if you look at meta, for instance, this year.

>> that's true. look at the sector laggards this year. energy is down 3%. utilities down 11%. it would be logical to think you'll get some modest mean reversion going on in the month of january, but it's tough to get excited about energy. i mean, look what's happened this year, the geopolitical events, and yet oil never appreciated because the supply is so heavy. consumer staples have some demand issues out there. we are seeing reductions in inflation around the commodities associated with consumer staples. but there's demand issues. i think there will be difficulty raising prices in 2024. utilities still have, even with the ten-year yield at 3.8%, utilities are still, you know, the treasurys are still serious competition for utilities. so, if you want to say, i would pick these three sectors as mean reversion trades for january, it would make some sense. but on a fundamental basis, it's hard to argue for some massive turnaround. >> within the consumer staples, let's just focus on one particularly hard-hit area, which is the food stocks, which

i follow carefully. jm smucker, campbell's soup, general mills, these stocks are down between 20, 30% so far this year. it's been a triple whammy for these food stocks. not as attractive dividend plays, no question about it. the glp-1, i mean, do you remember that selloff toward the back end of the summer? it hit the food stocks. it hit the alcohol stocks. it hit the medical device makers. it's going to change the world. i think there are some serious questions. >> so, you think that's an overhang in them? >> it could be. they've come back a little bit. they've come back a little bit, but it's no question in overpaying when we don't know -- i mean, look, are a hundred million people in america that are obese going to be on these glp-1s? probably not. that would bankrupt medicare. but as coverage expands and we continue to see these game-changing health results of these drugs, i think there are questions about package sizes. there are questions about volume sales, and what we're going to see. a lot of the food companies said, it's too early to tell. we're looking at it.

what can they say at this point? but there are other headwinds here with this group in particular, which is, they've benefitted from higher pricing. double-digit pricing on inflation. as we see disinflation in food, they don't have that pricing power, and they've lost the volumes, because there's a certain point where consumers just aren't going to pay for these higher-priced food items. so, that's hit the food space in 2023. could revert if we continue to see falling interest rates, they become more attractive, just like utilities and staples, but that's an area that was painful. >> on the other hand, we should -- wouldn't it be wonderful if the country had a massive decrease in heart disease? >> yes. >> wouldn't that be something? would you be willing to pay less for food stocks with that kind of return? i'm very excited about all these weight-loss drugs. i think the health care implications are just tremendous. >> amazing. and lilly has to be one of the stocks, charts of the year, and now, you know, there's a new catalyst. we're going to see how the rollout of zep bound goes, the

obesity answer to their mounjaro drug. i think another question for health care in 2024, it's always shaky when there's an election year. in health care. because you get promises of cr crackdowns of drug pricing, medical insurance. the only thing that's positive is if we do see a trump-biden election, they've both been presidents before. trump didn't do anything on health care, and biden did the crackdown on medicare pricing that we already got from the inflation reduction act. >> it's going to be an interesting year. a lot of cross winds, including political cross winds. tesla shares are rallying toward a three-month high, surging more than 110% year to date. it's on track for its third best year on record since the ev maker went public in 2010. bob, people are optimistic about delivery numbers that are going

to come out next week. will they hit the two million target that tesla originally wanted? not necessarily, but there are signs, i think, dan ives wrote yesterday, of wedbush, that demand in china has been stronger. but there's competition in china too. byd set to become the world's largest ev seller. >> just today, chow mi. they're coming in very big. here's a company that's very hard to figure out in a certain way, because so much depends on one person. so, you can talk about things like forward earnings multiples, but so much really just depends on what mr. musk's focus is. so, we're up, what, 112% this year? it's the seventh biggest stack that's out there, $830 billion market cap. the multiple, 67, 68, that sounds crazy when you consider the typical multiple for the s&p right now is 19 or 20, but that's where it's always been. it's always been in the 60s.

the average has been about 72 times forward earnings for tesla in the last five or six years. with believe it or not, with tesla up 112%, you think the market multiple has gone through the roof on it. actually, it hasn't, because the earnings estimates, just like microsoft, have gone up in relation to that. there's nothing particularly out of whack with the historical movement in tesla. it's just that so much depends on mr. musk's -- where his focus is actually going to be. the historic high, i would note, though, we're well off. we opened at $261. that's where tesla was earlier. there's a long way off. there's a lot of -- i think a good part of the investing public has become concerned about his distractions. i think people like me and other people would like to see him settle on the stuff that really changed the world, getting to mars, changing the ev industry, and not worrying so much about twitter and what's going on. but then again, mr. musk doesn't

listen to those kind of things. >> i think he thinks that changes the world too, having the free speech forum. just on news today, the stock is up, but two senators from connecticut and massachusetts have written to elon musk, to tesla, calling on him to swiftly recall steering and suspension parts after an alarming report, they say, by reuters. this is the reuters investigation a few weeks ago that reported that the company allegedly blamed drivers' abuse for some of the failures of the components, despite knowing, in advance, that certain parts were flawed. so, this is blumenthal and markey, and they are expressing extreme concern, they say, about tesla vehicles. we'll see -- tesla's brushed off those sorts of headwinds before. >> it's very difficult to tell what's the real safety record of these cars, because they're still not a lot of them that are out there. >> they get great ratings, great safety ratings. >> their satisfaction ratings

have not been as high. remember when it first came out, the original tesla came out years ago, consumer reports gave it a tremendous rating, and the numbers, the ratings numbers have come down since then, but look, the important thing is the retort about electric vehicles is people say they don't want to sit in the car that's self-driving, and yet, if you get it right, there is no doubt that self-driving cars are far safer than humans driving. i always say, is there anything worse than a human driving? it's certainly true we have a lot of problems with self-driving vehicles, and we need to work that out. they're not ready for primetime yet, but humans are not ready for primetime either, and the death rate, the accident rate, 42,000 people killed on the roads last year. shockingly high. shockingly high. >> what about robots? >> we need to find a way to bring that down, that's why i'm for electric vehicles, even with the imperfect technology. we need to keep working on that. >> agree as someone who's a terrible driver. what about the robots? did you see musk is responding to these media reports about the

robots? this is the -- out of the information, a tesla engineer was allegedly attacked by a robot at a factory near austin, but it points to a 2021 injury report, left a trail of blood, according to witnesses who spoke with the information. "the daily mail" picked it up too. elon musk, pouring cold water on it, saying it was two years old. >> was this a routine robotic accident in people get hurt on assembly lines. that is not that uncommon. i'd like to know a little bit more about this. i mean, their tendency is to think we have robots gone amok here, but let's find out more about what happened. if it's two years ago, and it was a, whatever a software glitch or something happened, it may not be a major issue, but again, i'd like to know more. >> more than just the dancing robots. time now for a look at some of the travel stocks, which have also seen a pretty nice rally. dom chu has been tracking that

sector. >> a rally. a great rally for certain parts of that travel and leisure market, but not all of them. an interesting divergence happened in 2023. sara, bob, to that point, if you look at some of the best performing stocks within the s&p 500 over the course of this year, 2023, it was all about the locations that you would go to for a vacation and booking yourself a stay at those locations. what i mean by that is, if you look at the cruise line operators, royal caribbean up 163%. carnival use line, up 131%, and norwegian, up about 68%. these stocks were some of the best performers out there in terms of getting the travel and leisure trade intact here. that's big, because we're still nowhere near where we were pre-pandemic, but it's a big one in 2023. now, the other part of that story is getting the reservations for going to a hotel stay or booking yourself a flight or a cruise or anything else. booking holdings, up 76%.

expedia, up 75%. and airbnb, up 60%. those booking platforms had a banner year in 2023. some of them at or near record highs. others have a little bit more to go. one place that hasn't seen the kind of participation that we have from some of these other names has been getting to those locations. airline stocks have not done very well at all on a relative basis. you take a look at southwest airlines, actually down for the year. american airlines, up 10%, still underperforming the broader market. united airlines, up about 11% as well. it's been an interesting divergence, sara, when it comes to consumer spending. investors have favored those destinations and the ways that you get there but not the travel itself to get to some of those sp spots. >> unless you're taking a cruise, which isamazing. >> yes, exactly. >> dom chu, thank you. as we head to break, let's hit the bond report now and take another look at how treasurys are faring this morning. little bit of a reversal of the

trend, which has been buying bonds. we've seen it over the last few weeks. it's been a powerful rally that pushed the yields all the way down to levels we haven't seen in months. a little bit of reversal. ten-year yield firmer at 3.831%. last night, got down to 3.79%. it's been global too. german bund yields are at the lows of the year. we'll be right back on "squawk on the street." in the u.s. we see millions of cyber threats each year. that rate is increasing as more and more businesses move to the cloud. - so, the question is... - cyber attack! as cyber criminals expand their toolkit, we must expand as well. we need to rethink... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security.

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.. our delivering alpha survey asked investors where they expect to see the best returns in 2024. 28% of respondents picture the s&p 500, 16% the nasdaq 100, 12% selected chinese stocks a contrarian view we'll talk about and etfs. we're going to look at a top pick f yorour one that has been a laggard, after the break.

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you're probably not easily persuaded to switch mobile providers for your business. but what if we told you it's possible that comcast business mobile can save you up to 75% a year on your wireless bill versus the big three carriers? did we peak your interest? you can get two unlimited lines for just $30 each a month. there are no term contracts or line activation fees. and you can bring your own device. oh, and all on the most reliable 5g mobile network nationwide. wireless that works for you. it's not just possible, it's happening. we are watching shares of wireless carriers for the year. at&t trailing its competitors down 10%. our next guest sees a turnaround for shares in 2024, bofa's david barden named at&t his top large cap telecom pick and joins us

now. the whole sector hasn't really been in demand this year, especially at&t. a do you think changes next year? >> thanks, sara. great to be here. thanks for having me back. the wireless industry had three challenges in 2023. number one, was that the market was worried what the post-pandemic competitive climate would look like. i think number two, was that there were rumors that amazon might be jumping into the industry, which turned out not to be true. i think number three was that the "wall street journal" article that came out around mid-year talked about some riskses that could exist around cables which saw ultimately the environmental protection agency seems to have dismissed. we think we're really better set up into 2024. >> david, bob pisani here. one of the things at&t, a widow and orphaned stock it used to be called 30 years ago, for that dividend, still there, 6.7%. that is in the top 20 for the s&p 500 in terms of the highest

dividend levels. there are people who still own it, and i know it's generally, you know, the lowest level since 1993 and down 10% this year. you have almost a 7% dividend yield tends to mitigate the downside on the price. how safe is that dividend? do you think any changes will come in 2024? >> thanks, bob. look, the dividend is safe. at&t is our top pick for really three big reasons. number one, it's been a great fundamental performer for the last two years. it met or beaten all the fundamental expectations in the wireless industry, in the consumer fiber industry and we think that's going to continue in 2024. the second big reason is valuation. at&t is trading on multiple point or two multiple points below their telecom peers. the third is positioning. this is interesting. of the 90 stocks in the s&p 500 that are over $100 billion in market cap, at&t is numbered 90 in terms of ownership. it's the least owned mega cap stock in the market.

>> you have 6.8 p/e. people don't realize how low these p/e ratios have gotten on the telecom stocks. on the lead cable story, do you have anything you can add? it seems to have gone away at this point. is this not an issue investors need to worry about? >> when we think it's kind of a nonissue. we looked at the history. there's not a lot of precedent for there to be a lot of liability here. the industry working on things like lead water pipes and so the ep has come out and really kind of validated the company position, but there's not a lot of public safety at risk. >> david, thank you. david barden. >> thank you so much. >> on at&t. coming up more top pks ficor 2024 on tap for you. another hour of "squawk on the street" straight ahead. all right. 60 seconds to draw the perfect gift. what's it gonna be?

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why are we the only birds heading this way? migration is... stay close and everything will be alright. [ gulp ] i'm okay. yeah, no. hold on! [ quack, quack ] welcome to another hour of "squawk on the street." i'm sara eisen with bob pisani. we are live for you at post nine of the new york stock exchange. carl and david have the morning off. take a look at stocks as we continue this run. we're now going on nine weeks strong. the s&p 500 up 0.2 right now. dow is up, nasdaq 100 continuing to climb past a record high.

the dow also closed at a record high yesterday. utilities are leading the charge for a change today up 0.5%. health care, the two lagging sec sectors are up today. financials going strong. what's lagging, energy, materials and consumer discretionary. take a look at treasuries. the trend has been buying bonds, lower yields, reversing a little bit today, but nothing sharp. we've got a 10-year note yield around 3.8%. the 2-year yield around 4.2%. we're 30 minutes into the trading session, three movers we're watching. microsoft on the move as wedbush raises its price target on the name to $450 a share from $425. bullish on the company's ai opportunity. we'll discuss later this hour. a number of companies seeing shares hitting 52-week highs this morning. amd, meta, american express, royal caribbean among them. watch tesla today. shares rallying to three month highs on pace for their third best year on record. stock is up more than 100% so

far this year. and pending home sales just out moments ago. diana olick has that afternoon hours. diana? >> bob, pending home sales in november were unchanged from october. the street was looking for a 1% gain. sales were down 5.2% from november of last year according to the national association of realtors. this number is based on signed contracts during the month. a forward looking indicator of closed sales. also, this is the most current look at what buyers are thinking. and mortgage rates here are key. the average rate on the 30-year fixed soared over 8% in mid-october and then dropped sharply to 7.5 in the first week of november. it ended the month around 7.25 and that's why the street was looking for a small bounce. now the realtors did note in their report that while it didn't result in formal contracts, that drop did spark a surge in interest according to their locked box indicators, the boxes that record showings when people open the door.

pending sales rose slightly in the northeast and midwest and sharply in the west where prices are highest. sales fell in the south. mortgage rates are solidly in the mid 6% range which could bring a boost to sales to start the new year, if we get more supply on the market which we sorely need. sara? >> the important thing here is, diana, give me your thoughts on this october pending home sales were the lowest since april of 2020. how about any signs new listings are going up? we had this paradigm that people will hold on to the 3% mortgages forever but that's going to be an old story. people have to do things. they have new jobs and they have to move eventually, some time in 2024. is there any sign that that's going to be changing? i'm asking about new listings increasing or something like that? >> yeah. we did see a slight bump up in october of new listings, and so that could help a little bit. really, we're still 38% below on

inventory. 38% below prepandemic levels. the thought is okay f you're looking at a 6% rate and you've been in the 8% range f you're a seller maybe it's not as painful when you think about moving from a 3% rate to a different house to get the 6 or 5% rate if we move in that direction. i think if we get closer to the 5% range you will see more sellers willing to list, but again, it's going to take a lot because you remember the vast majority of homeowners today have rates not just below 4%, but a lot below 3% which i do. >> yeah. lucky you. thank you diana olick. so this is one of the reasons why i think people are a little nervous, bob, about the disinflation trade next year. that's been helpful for the markets why the fed has been able to pivot away from rate hikes and talking about interest rate cuts. torsen was from apollo, was worried about the housing market

reinflating. diana reported pending home sales flat, but the interest is there. here's one of the charts i put together today, and it comes from the apollo and they look and break down all these ways to measure what's happening with housing inflation. owners equivalent rent a part of the cpi, zillow rent prices. you say it's lagging, and it has come down a lot -- >> look at that orange line. this is hard to read, but look. they're going to tell you looks to me like those numbers are going to come down dramatically because that's leading indicator, zillow a leading indicator -- >> some people think it's hooking up. you saw it come down, bottom, and if you look at the s&p case-shiller, a little bit old, that's the blue line you see on your chart, ticking back up, i think that we want to watch these trends. we don't know if they'll continue to come down or if they'll go back up. the problem is, not a problem, but for the fed, you know, mortgage rates have come down so much that if it spurs a lot of

activity that keeps pricing pressure high. we have this low inventory problem as diana mentioned, well below levels prepandemic, okay, so i'll do on the other hand, play jon fortt. inflation might continue to be a non-story next year. have you seen what's happening in the tips market? these are inflation expectations. they have come down to dramatically to target fed levels, 2%. here's a 10-year tips break even. david rosenberg posted that in his note today down to just 2%. the fed has to be happy with that. there's no signs that people are worried about inflation being out of control. the contrary, going back to target. you see this in the five-year as well, you see this in the five-year tips rate. all the inflation expectations where the fed wants to make sure it's anchor red are showing a me lower. >> there's good support. shout out to jeremy siegel, our friend at the university of

pennsylvania, who months ago, many months ago, said watch the housing component. it's a lagging, the way the fed is measuring it, lagging. you want to look at other modern indicators like that zillow index, which seems to indicate the numbers are going to be going down. >> yep. >> so that's going to be the key story. who is right here? and it's probably both are right. the fed is a lag. the fed's measure of housing is lagging indicator, more accurate, more up-to-date measurements like the zillow index, seem to indicate the numbers are starting to come down. there's your story. we'll know in three or four months how right they are and that will determine a lot about the course of inflation. the cpi numbers, pce numbers. >> for sure. >> and the course of the fed policy because now the market is all excited about rate cuts. we expect six next year starting in march. >> this matters for the entire market posture. our next guest is optimistic that the current pessimism set to fade away in the year ahead. moody's chief economist mark zandi joins us now.

the pessimism is fading this year. where do you see pessimism? >> i agree with you, sara. i think the pessimism is fading away. i mean, you know, clearly a year ago i think everyone was on high alert, hair on fire, you know, with the better inflation statistics, good economic views pessimism is fading away. the surveys i'm perplexed. the blue chip survey, i think the typical economist still expecting, you know, almost a 50% probability of recession starting some time in the next year. maybe that's going to change as we move forward quickly, but still some pessimism throughout. the pessimism is fading away. >> i have to give you credit, because you came on during the times where everyone -- there was so much hand wringing over recession and the unemployment rate going higher, and you said nope, i don't see it. i don't see stress in the labor market. it's a soft landing. you were out front on that call. you were right. does it stay through 2024?

can we -- can the fed really stick the landing? >> well, you know, you're so kind to bring that up. i remember that. >> i remember. we had like a heated argument. >> yeah. we were on set at the -- where were we? >> we were here. >> yeah, yeah. and there was such pessimism. i remember. i went on a little bit of a rant. fortunately, things have kind of gone my way. you know, it's a little early to declare victim. i t victory. we can only do that when the fed starts to cut interest rates. i heard your conversation around inflation and the cost and growth of housing services. that's going to come in. i feel confident in that. rents, which drive the growth in the cost of housing services will continue to be weak because we have a lot of multifamily supply coming into the market in the coming year. vacancy rates will rise and put downward pressure on rents. i feel confident we're going to see inflation back close to the fed's target by this time next

year. all the trend lines look good here, but still, probably a little early to declare victory. >> happy new year. you were talking about all the optimism throughout. one of the issues when you get the optimism is the market tends to get a little pricey. it's not terribly attractive from a valuation point of view right now. it's almost 20 times the s&p 20 times 2024 earnings system. we're expecting earnings to grow 11 or 12% next year. that's on the high side of the historic norms here. does that worry you at all? a lot of stuff has moved up since november that used to be extremely attractive, that's now middle of the road and some stuff arguably over valued? >> not so much, bob. you know better than i, we need to take out the top 7 stocks, the so-called magnificent seven. the valuations look more in line. maybe on the high side of fair

value. it's really the high-flying, you know, ai-driven, you know, tech stocks. that has its own dynamic and own story and you can make your own decision about that. the rest of the market looks like it's okay. my sense is that the valuations are, you know, roughly where they need to be, assuming the fed does cut rates next year as the markets anticipate and assuming we don't suffer a recession, which i think at this point is a pretty good forecast. i think we get kind of middle returns for the s&p 500. we got a boatload of returns, but in the coming year, i think let's put it this way, i think if you're a prudent investor, saver, planner, you know, you kind of assume mid-single digit it kind of returns in 2024. >> i do wonder about bonds in 2024. we had a few shaky auction this year, maybe minor freakouts around the size of issuance. treasury took note of that, and

so far we've had some strong options, yesterday, even more on the back of the fed cut outlook, but i wonder, mark, if this becomes an issue next year where we have a -- quite a large deficit to finance? >> yeah. you know, my sense there, too, kind of sort of where, you know, the fair value is on the 10-year treasury yield, the benchmark for bonds. hovering around 4%, give or take. it will be up and down and all around 4. that feels roughly right to me. that's the nominal potential growth rate of the economy, how fast the economy can grow without generating inflation with inflation a target and then the long run of extracting income from the ups and downs and all around of the business cycle, that's where the 10-year treasury should be. 4% felt, you know, pretty consistent with where we are. i say with a great deal of intrepidation because things can buffet yields one way or another and deficits matter.

fortunately, the -- i think the issuance of -- the bond issuance, treasury bond issuance of 2024 is going to be less than in 2023, just because the deficit will be smaller. that might be helpful, at least buy us a little bit of time with regard to the impact that might have. >> we're going to pin you down since you were accurate in your previous forecast. so you think inflation is going to be back to target, 2% by this time next year. where is the unemployment rate going to be? >> around 4. >> we're 3.7, we get 2% growth, close to the economy's potential. if you told me 4% give or take, i would say that sounds about right. >> 2% growth? that is the soft landing spelled out. >> that, you know, sara, that feels pretty good, right. >> feels good. >> if i could have a piece of paper to write it down what i want, i think that's what we're going to get. >> mark zandi, thank you very much. >> any time. >> happy new year. as we head to break, our road map for the rest of the hour,

apple up almost 50% this year, under performing the magnificent seven names. we'll discuss where apple's next leg of growth could come from. >> clip hitting new highs and we have top picks in the space for 2024. it could be a game-changing moment in the ai arms race. we'll explain and discuss what's at stake. more of "squawk on the street." don't go anywhere. dow 6potsup1 in.

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the outlook for the restaurant stocks of the year. our next guest downgrades wendy and chipotle and upgrading cheesecake factory and cava. wedbush analyst joins us now. interesting series of moves here. chipotle had great year i think up over 60% as i looked a minute ago, yet you're downgrading it. explain why. what's going on? >> there's a couple things. first, thanks for having me. you know, number one, i think that near term transaction acceleration is being driven by a very popular karn ne asada going over last year's under whelming garlic steak at the time, and this ends at the end of q1. we have some tough compares towards the second half of next year, and i'm afraid, you know, specifically they don't have much in the way of new menu innovation to go over a very

popular carney asada next year. the valuation is calling for perfection and i think in the near term there's a very specific reason why transactions are accelerating and potentially after q1, we could see transactions start to decelerate. >> wendy's hasn't had a good year, down 13%, but you're still downgrading it at this point. explain that again. >> well the context is that the grocery inflation is much lower than restaurant inflation and it's going to stay that way for some time. on the margins we're seeing share shift from restaurants to grocery. qsr is direct meal replacement and they're more exposed and wendy's happens to be at sort of the premium end of qsr. to me, wendy's is a little less positioned than some others in qsr. >> dutch brothers, added to your

best ideas list. i like dutch brothers. it's an interesting little play on the coffee and somewhat fast food business, but still not terribly large presence in the united states. what's the play here? >> that's just it. there's not much of a presence, and there's a great opportunity. the unit economics are tremendous. best in the restaurant space, and, you know, they have a lot of company specific drivers kicking in this year. i think this is going to be a year where everything comes together and the values start to expand in a very meaningful way. >> and just finally we have to go, in ten seconds, upgrading cava here, went public this year. it's been okay. tell us how you feel about cava? >> again, cava is a great unit economics. i don't see any negative catalyst ahead of us. as long as the fundamentals

continue to perform, i think every growth is going to want in on this name and drive this higher. >> nick is the wedbush security restaurant analyst. still to come the chief sectors wall street says to bet on here and more on the day's movers you might have policed. "squawk on the street" will be right back. 478, the number you want to watch for is 4796, that would be a new record closing high. 22e nuy seen it sincjaar 20. we'll be right back.

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welcome back skydanto "squa the street." the delivering alpha investor survey, when asked about the weakest sector with the strongest upside in 2024, 56% of the more than 300 cios, equity strategists, port managers and cnbc contributors polled, said health care followed by 24% who said energy. that's why i did the health care a little bit. >> this -- >> in the hour. it has lagged. >> i give the portfolio managers kudos. it's a mean reversion trade. health care, energy, staples, utilities the underperforming

sectors. rationale to decide they might do better in 2024. i'll tell you what's interesting to me, again, this is our delivering alpha survey, grade the fed's recent performance. people hate the fed. wait a minute, 65% said good. 23% say excellent. is this 88% say the fed's performance is excellent or good? that's kind of -- >> it should all beexcellent if we continue to get this immaculate disflation. >> i'm agreeing with you. people have hated the fed for years and felt somehow they're making some horrible mistakes. i think the grade is justified. i'm surprised so many say so. in 2024, what will do better? 77% the other 493 stocks in the s&p that aren't the magnificent seven. only 23% say the magnificent seven stocks. this is a very rationale thing to say. >> it's also a bet that what we are seeing in the last few weeks, the expansion of the rally, the increased breadth,

small cap inclusion in the rally will continue. that will be the story. >> in a year with nvidia up 220%, it's a reasonable expectation that it would not do as well, still up, but not do as well and other stocks would, assuming the assumption is obvious, the soft landing will be real. the best way to invest in ai, 58%, big cap tech, 19% say up and coming stocks. 23% says -- we'll talk about it later but excellent survey results here, very interesting. >> all right. speaking of sectors, a check on the part of the market seeing fresh highs today. dom chu has that. >> sara and bob, the broadening out of the rally survey result there, a few of the sectors are trading at their highest levels in about a year, including the financials, which has been kind of moving between gains and losses at this hour. one of the etfs that tracks those, the spidr, managed to notch its highest level since april of 2022, still around 10% below its january 2022 all-time

high, but financials very much a part of that broadening out story. there's a mix of names reaching 52-week highs today including american express, also s&p global and insurance giant aig as well. on the banking side of things, jpmorgan, goldman sachs, bny melon, all at their highest levels in over year at this point. those names up roughly 10% or so, so far, maybe in december alone. for the prospects for the rate cut picture has grown in 2024. by the way, the folks over at carson group have crunched the numbers on which sectors tend to under perform the broader market during fed interest rate cuts which could happen next year. the financial sectors among those names falling 23% during the last four big rate cut periods. keep an eye on financials. it will be a big sector of focus with the fed and everything else. i'll send things back downtown to you guys. >> thanks very much. still ahead, after four straight quarters of declining sales, could 2024 see the start of a rebound for apple?

we'll discuss it in the next leg of growth coming up. the big cap tech stocks wall street says are the best ways to invest in ai here. don't go away. ♪ opportunity is using data to create a competitive advantage. ♪ it's raising capital to help companies change the world. ♪ opportunity is making the dream of home ownership a reality. ♪ ...and driving the world forward to a greener energy future. [applause] sometimes the only thing standing between you and opportunity is someone who can make the connection.

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and creepy ads that follow youa from google and other companie. and there's no catch. it's fre. we make money from ads, but they don't follow you aroud join the millions of people taking back their privacy by downloading duckduckgo on all your devices today. welcome back to "squawk on the street." i'm silvana henao with your news update. egypt has not received any responses to its framework proposal to end the war in gaza. the egyptian plan reportedly includes a phased hostage release and a government of experts to temporarily lead the gaza strip and israel-occupied west bank. egypt and qatar has served as mediators between israel and hamas since the war began and the country's war involved with the negotiation of november's temporary cease-fire. gypsy rose blanchard out of

prison. the case who inspired a hulu show and hbo documentary was convicted of plotting to kill her mother who abused her and forced her to fake serious illnesses. blanchard had been serving a 10-year sentence on a second-degree murder charge in her mother's 2015 death. shakira's hometown unveiled a 21-foot statute in her likeness. the colombian born singer is featured performing her iconic belly dance. the sculpture hopes the bronze statute will inspire other girls to achieve their dreams. next time i'm there i will check it out. >> wow. that is really something. >> yeah. >> thank you. silvana henao. wouldn't expect to see a statute of shakira. apple shares soaring with the magnificent seven up 15% in two months despite a year of four consecutive declines. how can apple get back to

growth? steve joins us with possible answers and despite the out performance on the year, a little bit of weakness here into year end. >> yeah. that's exactly right. we've seen it go up and down throughout the year. let's talk about what to look for starting next year. biggest question for apple is will it finally return to that top line sales growth like you said following those four straight quarters in declining sales and adding on to that, apple said for the current december quarter sales are expected to be flat. despite that, apple shares are up about 40% so far this year, so overall really good, but let's talk about the good news and bad news about what can return them to growth. here are some of the headwinds. the bad news, in china, especially, huawei returning starting to sell smartphones again for the first time after being out of the game for a couple years and we have some information and data that shows people might actually be switching from iphone back to android specifically those huawei phones. also, the online gaming crackdown from the government over there that we've been

talking about the last week or so, that can impact revenue in services specifically in the app store, of course, and as we've been talking about all year the slow economic recovery in china. now the u.s., apple watch, that ban is still being worked out, despite the reprieve that apple got yesterday. the watches are going to be on sale again, but let's talk about the good stuff. there is positive momentum going into 2024. particularly services growth. reaccelerating again. that's that that high margin business up 60% in the september quarter. and on top of that, let's talk about the hardware side. some signal, pakistan c and phod have bottomed out. the new vision pro headset, it's going to be a small launch, $3500. only sold in the u.s. at first. only in apple stores. this is not a mass market product. it's still all about the iphone, guys. >> you know, steve, it's bob.

happy new year. apple despite the concerns here, it's still up 50% on the year. i look at the forward multiple, very closely at the tech multiples, 2024, 26 times 2024, the multiple 26 times. that's close to historic norm for apple. it's usually in the mid 20s somewhere. i know that there are these concerns you mentioned, validly, and yet the market seems not to be terribly worried about apple's ability to grow. does the market have something wrong here or is apple going to prove everybody going -- the bulls are correct? >> you're right about the multiple part. it's maybe cheaper than it has been in the past. you also have to keep in mind, bob, buybacks. a huge part of what keeps people in even without the top line growth and even last year when we saw all the tech names drop like a rock. it was the buybacks that kind of kept apple up, you know, at least a head above water a little bit. so i mean, yes, to your answer,

the market is keeping it on the cheaper side, but look, there is a lot to overcome, especially with all these new regulations coming into effect over in europe. >> steve, thanks very much. appreciate it. >> thanks, bob. stick with tech, the ndx on pace for its best year since 1999 thanks to rally in big tech and investor enthusiasm surrounding ai. according to the delivering alpha survey, hope you were listening to it, microsoft and nvidia and amd the key names to watch looking to invest in ai. our next guest has been a long-term tech investor and points to a different large cap pick to bet on here and that's taiwan semiconductor citing strength in the ai revolution. doug clinton is the deepwater asset managing partner and joins us now. doug, happy new year. i like your piece today. i'll tell you why i like it. you get right to the point here. here's what you say, i'm quoting doug here, our view is that all roads to ai compute lead to taiwan semiconductor nvidia, amd, amazon and others use

taiwan semi to fab ai chips. no matter what chips power the ai revolution, taiwan semi will make them. doesn't get any clearer than that. tell us why taiwan semi has become so dominant here and why you think the domination will continue? >> happy new year to you as well, bob. as we go into that new year, 2024, we've been trying to look outside of the mag seven, companies that do have real exposure to ai, that all the mag seven do, but haven't had that same run. tsm is the best name for that in our view. you think about the nvidia and amd. everybody sees those as player number one and player number two in terms of who will likely win this ai chip race. but both of those companies rely on taiwan semi to actually fab their chips. so, it stands to reason to us famd, and nvidia are going to

benefit from this commute market, taiwan semi should have that same tailwind and we haven't seen it in the stock yet. >> a number of companies you mentioned here in your note, eventbright, kind of priced me, event bright, they do event management services. but a pretty small cap name you like. i know it shows up in my inbox all the time because i get event invitations from them. what interests you about them right now? >> we look across small to large cap and trying to find, in our view, what are kind of the best companies, companies that make products, that customers love, and that they can't really get anywhere else and as you mentioned, you see event bright in your inbox all the time. no other player in town in this game for eventbright. they have the whole game to themselves. what excites us about them is they are using the classic marketplace playbook. we saw amazon and etsy adding advertising services to their

market places. they've been incredible and great high margin growth businesses for both of those companies. event bright has just started doing the same thing. it's still a really small part of revenue today, but we think that those ad services that event bright is on to its existing management platform will be something that can help them continue to kind of grow strong double digits and then translate a lot of that to the bottom line because it will be very high margin revenue. >> just on taiwan semi again, you know, do you have to consider geopolitical risk investing here and where do you think the chip wars go in 2024? 2023 it's been calm and it's been a boon for the sector as we've seen countries, rushing to subsidize the sectors and build out their own semiconductor plants and factories. where does that go? >> sara, i think you have to consider that geopolitical risk, but the way we think about it, that geopolitical risk by

extension sort of hits nvidia and amd as well. they're not getting that discount for geopolitical risk that tsm is, even though if there were an issue that hurt tsm, it would certainly hurt nvidia and amd also. it's hard to make a call on what will happen with taiwan, but we think that the discount that you're getting in tsm right now that i think does reflect the geopolitical risk does account for anything that could happen and if there were an event we think the stock would recover after that beyond just taiwan. the company being based in taiwan, they do have fab and washington state in the united states. they're building a fab in the phoenix area in arizona. so they are distributing globally and i would expect tsm to build more fabs in other countries as well to diversify around that risk. >> let me move on to another stock that you like a lot, a cathie wood favorite, unity software. this is a video gaming software

company and by the way, you run the deepwater frontier tech etf, want to get a plug in for that. this is also a name that's in there. what about video game software do you like? >> for unity, it's really that they have a new leadership structure at the company. they just brought in jim whitehurst, the former ceo of red hat. he had a great, successful exit with that company. what i think is really exciting about jim coming in and running the show at unity, is that he brings this experience of having a really passionate developer community at red hat with open source, and now at unity with kind of game developers, people that build in 3d, it's a passionate community and i don't think the company has fostered that community well enough over the past few months, maybe even year or so. and i think with the new leadership they're going to go in and pull out some products that really are distractions and i think you might see a couple quarters maybe where growth is a

little bit iffy. there's a lot of questions about what ultimately do they need to have in terms of products going forward, but i think as we get into q2 we'll start to talk about a return to growth at unity because we do believe that gaming and 3d may be powered by apple with spay spacial commutie two big. >> cathie wood the flagship ark fund up year to date. happy new year. >> thanks, bob. after the break, the ramifications for big tech and ai as the "new york times" sues microsoft and openai over copyright infringement. what investors need to know, next.

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welcome back to "squawk on the street." what is the best way to invest in ai? according to cnbc's latest delivering alpha investor survey wall street says big tech is your best bet. 300 portfolio managers and more polled said mega cap neck, 23% said they're avoiding it, too much hype, and look, up and coming stocks in the space, sara, 19%. again, this, i think, is very responsible. i personally would argue broadening out myself, having watched this for 30 years, chance of smaller companies are going to play catch up in 2024, so i would be in the smaller cap space. but i think a lot of people understandably would look at nvidia up 220% and say there's nothing there for me to invest in, i'm too late. >> although, they are one of the few companies generating revenue off generative ai, right, and

have seen increasing profits too. >> the question is, is the hype going to continue? are we going to see lots of companies that are -- there's no real revenue but they're small and potentially can be winners? this is the internet play. we saw a lot of companies basically didn't make it through 2000 and yet a small number of people were the big winners. i think that's going to happen in 2024. >> also the private companies to watch, too, anthropic yesterday saying it will have more than $800 billion in revenue by the end of next year. the world of ai, the "new york times" with a copyright lawsuit against openai and microsoft yesterday. they're accusing openai to steal its content to train large models. they expect the rights of content creators and owners, our next guest saying this is a well crafted lawsuit. law school chair and intellectual property codirector daniel gervase joins us to unpack the suitand what could come next. it's greet have you.

why do you say this is a well-crafted lawsuit? >> thanks, sara, for having me. well, i think that lawyers learned from some of the previous lawsuits, this is one of many against, providers of large language models like openai, and some of these lawsuits have issues, some of the claims were dismissed early on, on a motion to dismiss, and i think this lawsuit is crafted in the way that will probably mean it would survive this kind of early motion so that's definitely a lesson learned by the lawyers. the second thing i would say is typically copyright lawsuit is basically saying something like, you know, you copied something and you owe me money, but the lawsuit, the first line in the complaint is, that we need independent journalism for democracy, so that it's a lawsuit that's really not just about money, the way that

they've couched it, it's really about the future about journalism. >> what you say here is that it's about -- that the gripe is about the input and output. what goes into the large learning models from the "new york times" and competes with it and how it's often wrong and misrepresented. i wonder if that's a new element than some of these other lawsuits which are just claiming that the information that goes in is stolen. >> yeah. there are two distinct copyright claims in addition to an interesting trademark claim the "new york times" is making. the two are basically when you train your large language model you make a copy of our millions of articles, we don't have the exact number, that's copyright infringement and they say when you ask chatgpt or bing, you know, give me information about something, they give specific examples of articles from the "new york times" that were quoted verbatim in the output

and say that's also copyright infringement and in both cases the defense that we should expect from openai and microsoft this is all fair use. in fact, the complaint says, that the defendants publicly asserted that this is fair use. so the debate will be about the thing called fair use, a defense to copyright infringement. >> bob pisani here. i wonder what chances are of them winning this case at this point? i'm a member of the authors guild. i had a book out last year, and i signed -- i was one of thousands of authors that signed a letter to these companies asking them for more transparency on how they use our books to train their ai systems and potentially leaving the door open for compensation. what are the chances the "times" could win and what would be the implications? all of us authors who had books used to train the ai, suddenly subject to potential compen station in what's the knock-on ramifications here? >> that's a great question, bob. so when you talk about expected

value of a lawsuit you multiple the chance of success by the potential dollar amount. and on the copyright side, the law says that they can -- that plaintiffs can ask, they're not going to get that, but they can ask for $150,000 per article and they're talking millions of articles. you can see how that's a catastrophically large number potentially. obviously, no court is going to give that maximum, but it could be very large award. so the real question is your question, what is the percentage of, and that's very difficult to predict because there are a couple precedence that the courts will look at here. the one you mentioned the google books example, is the one that openai will probably rely on. the court said it was fair use for google books to copy all these books to make snippets available. but the supreme court in the more recent case involving andy warhol's use of a photograph of prince, tightened a little bit

one of the criteria. so it's very difficult to predict. looking at this as a business, as an investor, you have to be looking at a percentage that's going to be within a pretty broad range, multiplied by a potentially very large award, if even part of what openai is doing is not fair use. of what openai is doing is not fair use. >> why can't they just -- associated press signed an agreement with openai to license news stories. i think there's been others as well. the owner of politico, business insider. would that avoid thisproblem? is that the way to get around this? >> mean, i think it would make business sense. both parties here have the same interest, which is providing high-quality content to people. so that the "new york times" wants people to access their material. openai and microsoft want access to that content. it's really just a question -- just is a big word -- but a question of how much.

and probably some attribution also so people would know this was a "new york times"-sourced article. i think the lawsuit is -- in fact it says that, they've been talking for months and failed to reach an agreement. the lawsuit may be a way to get negotiations to move forward. >> i wonder if there's a bigger question here that the new york times is getting at for media companies and if it prevails in a case like this, any media, broadcast companies, news outlets would be able to go after openai. if the "new york times" goes all the way to the u.s. supreme court and wins even part of its case, this would be a tremendously important precedent. i think everyone is watching this lawsuit, also because you can expect lawyers on both sides to do their very best. definitely, there's an existential question that the lawsuit raises about the future

of journalism itself, which obviously is also interesting. >> right. but the damage has already been done. they're using journalists and they're using authors books to train ai models for profit. that's simple. i'm sure we'll have you back again soon. daniel, thank you again. happy new year. >> happy new year. thanks for having me. after the break, a look at this year's disappointing market debuts and w se eehyomgrn chutes for 2024 are appearing. stay with us.

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welcome back. wanted to chat about the ipo situation in 2024. let me tell you about 2023, it's a year to forget. look at the numbers. 19.4 billion is the amount of money raised in all ipos. thanks to renaissance capital for providing this. the problem is in a normal year you'll do $50 billion, $60 billion, as high as 90 billion in some years. 2022 was another poor year. this is the worst in decades, $7.7 billion. that's a big issue. we have a lot of companies just

sitting in the pipeline that for whatever reason, interest rates have gone up, is the main reason. they can't go public anymore and they're trying to figure out a way to do that. the market is tough. in theory, the technicals, this is the perfect time. s&p at a new high. interest rates are declining. volatility is low. on a macro level, it doesn't get much better than that, but a lot of companies with hesitancy out there. we had a mixed picture on ipos in 2023. we had big names early on, then it stopped the middle of october. if you look at cava, up 100%. arm, the biggest ipo of a long time, up 45%. birkenstock was the last significant ipo. birkenstock went public october 10th and we were all excited about it. unfortunately it came at a point where interest rates were still very volatile and it was really tough. here's the rest of them.

kenvue, klaviyo and instacart. panera, shein, a few out there. i'm hopeful with a market like this, things will go moving. >> too bad nobody goes public the final week of the year. >> nothing since birkenstock. it's been a rough year. >> it's sluggish. most of the year was higher rates. >> bob, thank you. bob pisani. our live coverage continues after the break with the dow up 50 points. we're on record high watch for the s&p. rylee! from rylee's realty! hi! this listing sounds incredible. let's check it out. says here it gets plenty of light. and this must be the ocean view? of aruba? huh. this listing is misleading. well, when at&t says we give businesses get our best deal, on the iphone 15 pro made with titanium. we mean it. amazing. all my agents want it. says here...“inviting pool”. come on over! too inviting. only at&t gives businesses our best deals on any iphone.

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good thursday morning. welcome to "money movers." i'm sara eisen. today, after the magnificent seven dominated the market in 2023, wilmington's trust is betting on small caps for the new year. the russell 2000 rallying 20% in the last two months. mark mahaney and why he says expedia