performer. >> pails in comparison to some of the other stuff, but if you have money coming out of tech that wants growth as gdp growth stays healthy, maybe this is the spot. >> jp this >> paypal, one of the better performers over the summer? i'm long. they made an announcement on crypto. i like it. >> "the exchange" begins now. ♪ ♪ thank you, scott. we'll see you later on. welcome to "the exchange." i'm kelly evans. ahead this hour, major stimulus out of china overnight. this time on the fiscal side, cash allowances, incentives for stock purchases and stock buybacks, meant to help the ailing stock market and economy. is this beijing's big moment or a temporary fix? we'll debate it and what it means for u.s. stocks. plus, a huge shakeup at openai as they pursue that

funding round that could value it at more than $150 billion. the chief tech officer and two research officers are leading. what it means for the startup and what sam altman and elon musk had to say. southwest is flying, up 10% day, on pace for its best day since may of 2020. after they announced a new buyback program and a sustainability profitability program. we'll head live to southwest. first, let's check on the day's market actions and the moves out of china combined with strong data here at home. that's the quieter part of the story today. the s&p is at a record high, as it has been on one out of five trading days so far this year. just a remarkable run. that said, it's the weakest performer today. the nasdaq is up 0.2 in line with that, the dow up half percent. and the russell 2,000 small caps

are up three quarters of 1%. 3.81 on the ten-year, as well. so we are seeing the long end continue to back up as it's been doing since the fed eased policy here at home. take a look at some of the other movers in china. that stimulus has names with chinese exposure flying, like all these up. wynn up 8%. we heard supportive comments from david tepper. let's talk about the semis for the moment. buffeted by two moves in two different directions. micron up 13.5%, better than expected guidance yesterday after the bell. different story for supermi supermicrodown almost 16%.

nvidia, shares are fractionally lower, and the ceo of an losa talked about how he said he hasn't fully bought into the growth story, questioning what things might look like in 2026. nvidia trading around $122. he also weighed in on the stimulus measures out of china overnight. that's probably getting the most pickup today, and that's where we start. let's begin with what beijing said. measures include $284 billion in special sovereign bed, with credit of a little more than $100 a child with households of two or more kids. and china has freed up cash days after the central bank cut rates, as well. tupper says this approach is new for china and a big shift is underway. here's what he told "squawkbox." >> the chinese will do more and

more if needed, but they don't say that, because it's not been healthy to say those things in china. but they said that the other night, and i listened carefully to what the government officials said. so they did a lot, and they promise to do more and more and more. and that's very strange language, especially for any central banker. but especially over there. so that was the first thing that happened. and last night, you know, we heard that they were going to have a meeting, but they blew away expectations on the physical stimulus. >> so what are the longer term implications for traders and these economies? let's ask bill bishop and derek scissors, asian economist. it's great to have you both here. bill, do you agree with tupper about the significance of these measures and the impact they're likely to have? >> so i do agree with him about the stock market. i think comments, especially a

couple days ago about these facilities where it will give $500 billion ad $500 more if we need it. and normally the september meeting is not about the economy. this one was specifically about the economy. and the readout specifically said boosting the capital market. i think we are very much in the -- they are going to really push out a bazooka to get stock prices up. the rest of the economy, the problem with the debt, the real estate crisis, the measures they have taken are much smaller steps towards resolving that and the real crisis of confidence in the economy. but i do think that we're on the cusp of at least a near-term real pop in the sort of chinese stock market. >> obviously, i respect what you and tupper are saying. what i don't understand, though, if the government really wanted to improve stock prices and economic performance, why would they have pursued these measures to crack down on their most successful tech giants, and is there any way they can undo that

now? >> that's a great question. this might be analogous to the flip you had on covid in 2001 where you had a resistance until they changed. in may, there was a meeting where xi jinping was quoted as basically asking where are my unicorns? what happened to all these billion dollar valuation tech companies. since then, you've seen a series of moves to revitalize venture capital, because i understand that if they want to break through the u.s. technology chokeholds and build out a real in innovative company, they need to have capital markets. so you've seen the shift that we have to tix the capital markets, and for whatever reason, it took a while for the policymakers to convince the big guy. he seems to have changed his

mind now, and that's what you're seeing rolling out this week. >> fascinating. derek, i'm glad you're here today, as well. i think the last time we spoke is i said what do you do with alibaba now as the government has put its boot on its neck. you said it's like a utility. are things fundamentally different now, or do you think this is just a sort of temporary breakthrough of some sunlight into -- and the clouds will quickly come back together again? >> yeah. much more of the latter. look, there wasn't a single mention of reform in any of these steps. people aren't reacting to them that way. they're reacting as asset price boosts. instead of saying hey, we want to let successful private companies thrive that will drive their stock market prices up, they're like hey, boost the stock market, because they don't

want private companies to thrive. they do want, at least for the moment, higher stock prices. so i don't think this will help private companies, because that attitude hasn't changed. they're still arresting people for saying the long thing, which prevents the kind of information flow necessary for good companies to be rewarded. let's remember, even on stocks, i agree that there's a reason to be bullish on chinese stocks the next couple of months. the peak of the shanghai composite was in 2007. so anyone saying i have a multiyear bullish view on chinese stocks has been wrong every year since then. >> i'm very sim pympathetic to view. >> i absolutely agree. this is a short-term deal for thes sets asset prices, but the does not look like a fundamental shift in fixing the problems. the biggest problem is around

the politics and economy. i think that will be a bit of a break on future growth until they can work through some of the bigger issues that are suppressing a lot of private activity in the country. again, perhaps we're all on the cuff of that ship, because there's so many economic down turns and the loss of confidence is causing a lot of social instability issues. but what we have seen this week is not dispositive that is what is happening. >> derek, what phrases are we listening for, what policy moves would tell you that this has something with more staying power versus something that will fade quickly? >> again, i don't see any sign of reforms. if you're looking at the monetary side, monetary policy just doesn't have any punch anymore. china's borrowed money is ten times than the u.s. there's no value to monetary

policy broadly. the fiscal side is a little bit more interesting. we've never seen fiscal support that matters to households. if that were to occur, it couldn't be there's a one-time thing. households don't smonrespond tot when they're under duress. what they would respond to is a change in pension structure, a change in the long-term support of households. then you could get a consuch shup response. it wouldn't be reform, but you would get a stronger consumer side. any time you see one-time transfers, that's all temporary. it's to put a floor on 2025, but it's nothing transformational for china. >> derek, what about the startup and innovative aspect of this? just the other day i was reading an article again about how successful founders have to go into finding. that was written days ago. would it change in the nature which they're treated, either be

imminent or signal there was a bigger move going on here? >> i think, yes. you would have to have obviously, you know, the fact that no one is getting arrested is not enough change, while welcome. you would have to have some very explicit from xi. because as bill implied, you can have people beneath him saying this will be a good idea. that doesn't matter for the kind of change we're looking for, which is transformational. oddly, a strange thing is if they were committed to keeping the property market down. if you pump a lot of money into the system and you don't keep it on the property market, it's not going to private unicorns, but will go into the market. so you have to tell people the property market is still not a favored destination. >> thank you both. we'll leave it there for now. investors here at home are cheering these recovery efforts,

david tupper saying he wouldn't be anything short in esche air or the u.s. but should longer term investors follow in his footsteps? let's talk about it now with peter bookmar, with dan greenhouse. peter, you were positive on -- just days ago you were lamenting the hong kong trade hasn't worked out so well. it's a very different story now. are you in this for a trade or something more longer lasting? >> the news wasn't necessarily big picture reform like, it was more just trying to put a bottom under the stock market and housing market. when you look out over the next five to ten years, the most exciting growth story in the world is the rising middle class in asia. talking about half the world's population lives there. so yes, china has issues, but it's india, thailand, vietnam,

indonesia. and even china's middle class is going to double in size over the next five to ten years. so there is a long-term story to investing in that region. you still have to deal with the delicacy of xi being the author tear -- leader that he is. but understanding that 15% of the world's population lives there. there is a middle class there that is growing, as i said, and consumer spending that has a lot of power to it if unleashed. >> you were seeing positive indications from the casino stocks. what are your favorite stocks for a position that might be more open to chinese -- what are some of your favorite ways to play these trends? >> we wanted to focus on travel and leisure, believes they were going to live life like we did

after the shutdowns. so casino stocks, to me those are the exciting areas. the macau casino stocks were trade bring they were in 2022 when the whole country was shut down. so they were being given away where the company was only given credit for their singapore business, and you were getting the macaw business for free. so the gross gaming revenues are above where they were in 2019. and golden week in october is fully booked. >> it's interesting, putting that into context, what it means for japanese and u.s. stocks. it was interesting, he said he's concerned a little about the u.s. stock market being overvalued, and that fed rate cut might be akin to the '90s moment when it comes and starts to ignite a bigger takeoff.

his two concerns is that japan overheats because of china's growth pivot, or that the u.s. market overheats. curious what you make of that. >> on the valuation side, dave is a strely successful investor, but i would say about valu valuations, and anyone that follows markets closely, valuations are not a market timing tool. we were discussing before we came on air, my favorite observation about the '90s bull market is the first time that the concept of a bubble was written about in "the new york times" in 1995. greenspan's exuberant speech was in 1996. stocks obviously marched higher for the next four years, and each incremental ascension of to bes were -- >> do you think we're going to continue to march higher because

it will consummate in a bubble? at 21 or 22 times, a lot of people say we should revert to something like historical multiples. >> listen, maybe. and multiples are mean reverting, but you have to explain to me why those five or six stocks, printing net income, growth rates into the triple digits, where they're going to rerate lower. it that will be the impetus for the broad market coming down. the bias is to the upside. just to the point on a bubble, i can clearly see ai will be in a bubble at some point. >> nvidia at $4 trillion. >> mark zuckerberg has already told us we're willing to overinvest, so the question is whether that time is 2022, 2023,

2024, 2030. >> so you stay long. we have china stimulus, european and u.s. rate cuts. you see nothing to counter that? >> in the short term no, but to ask peter about a question on that point. ultimately, the problem for china is the weakness in the consumer. 630% respond to surveys saying they want to save more. they have that savings rate. how as an investor in china do you wrestle with the idea that the consumer needs to be spurred on when they tell us they don't want to be spurred on? >> a think a lot of that ties into the housing market. home prices need to stop going down, but the chinese consumer is not much different than an american consumer. in to 19, the chinese consumer spent $250 billion on national tourism. that 25% of japan's tourism was

from china. they like to live like the rest of us, but they have ptsd from kofd shutdowns and this decline in the housing market where a lot of assets lie has been a seek logical and wealth problem for them. >> i want to mention some of the u.s. data. but estee lauder, alt goose, starbucks, are those -- sit green light for all of these stocks now or no? >> well, you take estee lauder, i'm long it. we own it, but we have to see whether there's followthrough here. they're just trying to put a bottom on things and hope it holds. >> let's talk to steve liesman to get janet yellen's read on the economy. steve, welcome. >> a lot going on. treasury janet yellen said the

economy looks to be headed on that soft landing path despite growing slack in the labor market and inflation is heading towards the 2% market. she was perhaps unusually forthright about her expectations for rate cuts. >> when you have an economy that's growing at potential, that's operating at full employment with inflation in the vicinity of the fed's target, that suggests that a more neutral stance of policy is appropriate. so the fed has had a policy of running a tight policy to bring inflation down. we've seen considerable progress on that front. and, yes, i believe over time, if we stay on that path, that rates will decline to neutral.

>> now, she would not comment on the pace that the fed should cut rates but did talk about at the u.s. treasury market conference and in our interview, pointed to risks in the economy from the non-bank financial sector and talked about stable coins and uninsured deposits, as well as liquidity risks at banks, adding the u.s. relationship with china is an important part of financial stability for the u.s., and it had improved during the biden administration with more communication on some of those issues. the secretary said she could only see intervention in the dollar, and the thinks the dollar's value should be determined by market forces. kelly, i just don't know if my fellow jam band enthusiasts on your panel are as excited as i am about the upward revision to gross domestic income this morning.

if you were bullish on the economy, you were looking over your shoulder the whole time that gdi. there was this big diskrepen si. it had been 2.4% points between gdp and gdi. they raised the savings rate, so the whole past looks better. doesn't tell us a lot about the future, but if you were worried we went through a statistical expansion, you're less concerned right now. >> which makes the job downward revisions more questionable. >> i don't know about that, kelly. >> the point being -- >> yes, yes. you go ahead. >> no you. >> the downward revisions were still relatively high rate. the problem, as by the way you follow fed governor bowman on this, the problem is we just

don't know how much immigration has messed the statistics. what looks to be happening, though, is that if we had fewer employed and higher gdp, it means the productivity numbers could look better. that's a good story for us, that those raised questions about fed policy and a whole bunch of different ways that maybe we need to dedicate a whole show to with your guests. >> any time. steve, i appreciate it. steve liesman. dan, this is super significant, because it tells us that we're not so -- you wonder if the fed should have cut by 350 after all of this. >> there was a huge debate whether they should have cut at all. there was some in the 50, i was in the 25 camp, and plenty of people who didn't think they should cut at all. the economy is slowing down, the job market is slowing down off of very hot levels.

>> what do you own right now real quickly? some might say the entire stock market is a green light. >> solace has been long the consumer right now. the idea that the consumer was always set to fall off the cliff, that was an idea we disagree with. >> now we have equity to map. any names that are attractive here? >> i think the china news gives commodities a green light. oil prices are down because of what saudi arabia is maybe dovp i -- maybe doing. there's some exciting commodity stories out there that china may help by putting a flash underneath their economy. >> what a difference a couple weeksmakes. gentlemen, thank you. the majority of corporate america says inflation has moderated thanks to the fed's earlier rate hikes.

when will it reach the 2% mark? let's ask frank holland. >> good afternoon, kelly. as we wait for the latest read on inflation tomorrow and the jobs report a week from tomorrow, we're get thing read from financial decision makers how they see inflation and how the fed's fight against inflation is going. nearly half say the central bank gets high marks for their fight against inflation. 17% say they're doing an excellent job, more than half, saying they're doing a good job, as well. the survey was taken between saug and september 19th. we saw the first trump/harris debate during that time and we saw a number of big economic issues. we saw the stock market, the s&p, move about 3% higher with tech actually underperforming during that time. so it was under those conditions we asked our financial decision

makers other questions about the economy, and just really how they see things. they said they had a very -- only 10% believe we will get to the fed's target of 2% this year, 31% say it will happen in the first half of next year, 21% said the second half of next year. but more than a third say it will happen in 2026 or later. more than half say the fed is creating conditions that will control inflation without a recession or achieve that soft landing. 40% believe we will see a recession in 2025. 3% believe we are right at this time, kelly, experiencing an economic downturn or recession. >> but they're cfos, frank. they're supposed to be a little more can you shousz.

-- cautious. coming up, southwest soaring today on the back of bullish guidance on its investor day. we have the details and the strategy for tending off this investor, elliott management. and an executive exodus at openai as the company considers restructuring for for-profit. "the exchange" is back after this. >> this is "the exchange" on cnbc. i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar.

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welcome back. shares of southwest are surging, although well off session highs, up about 6% right now, after the company hiked its summer revenue forecast and authorized a $2.5 billion share buyback. phil is in dallas at the airline's investor day with more on the moves. hi, phil. >> we're in the q&a portion where analysts are asking ceo bob jordan and the leadership team about some of the details they gave today about how the company plans to turn around its performance. we're not going to show you all of what the company said today in terms of it plans to do over the next several years, but new growth initiatives in terms of enhancing revenue. how do they plan to do that? international airline partnerships. southwest has never been able to tap into the growing demand for

international travel. they believe partnering with certain airlines will allow them to do that. they're targeting $500 million annually in cost savings. some will come through better utilization of the fleet. the fleet is a 737 max fleet they're transitioning to. but they're way behind in terms of the number of maxes they're obligated to receive from boeing. so their cap ex is about $500 million less over the next couple of years, and they'll moderate their fleet plans, not cutting the number of planes they plan to receive over the next seven, eight years. they're just going to be moderating a bit. it comes down the two things here, this is southwest versus 2019. look at revenue available per seat mile versus 2019. southwest has only grown 7%. the network airlines up 21%.

those two statistics explain the following chart. this is southwest under bob jordan, going back to february of 2022. we're only comparing southwest with the three other major airlines here. especially when you compare southwest to delta and united. they're nowhere close. so the bottom line for bob jordan, they've got to turnarounds their performance as quickly as possible, especially with the elliott management group, saying there needs to be all-new leadership here at southwest airlines and is threatening to call for a special shareholder meeting. we're going to talk about this with bob jordan first on cnbc today at 4:40 on "closing bell." you don't want to miss what he has to say. we'll talk about the initiatives they have outlined today and also talk about why he believes he's the person who should run southwest and turn around this airline. he is not planning on going anywhere, despite elliott saying he should be fired. >> phil, just scanning through the news wires to see if there

is anything that might have pushed those shares from being up 10% earlier to about 6% now. >> there's nothing specific, kelly. i think there's an overall question of whether or not they can hit the targets that they put out there. good example. they believe that they can increase their earnings by $4 billion between now and 2027. we had a guest on earlier who said i'm not sure they can get to $4 billion. some of these targets might be too optimistic. we'll talk to bob jordan about that this afternoon. >> indeed. phil, thank you. let's get to tyler mathisen now for a cnbc news update. tileer? >> thank you very much, kelly. arguments are underway to a new york appeals court on former president donald trump's $454 million civil fraud judgment for inplating the value of his properties. lawyers want to overturn the judgment levied back in february. no decision expected before the

election. the ruling can be appealed to new york's highest appellate court. joe biden announced $8 billion in fresh military aid to ukraine, including shipments of glide bombs ahead of his meeting with volodymyr zelenskyy today. zelenskyy also attended meetings with members of both sides of the capitol stoday. oakland will say goodbye to its last professional sports team. the a's will host the texas rangers at the oakland coliseum. first pitch is in about an hour. the team announced it plans to move to las vegas and build a stadium there by 2028. so long to oakland from the a's. kelly? >> following the raiders. tyler, thanks. coming up, openai is in the midst of an executive exodus, as

it looks to raise funds at $150 billion valuation. we'll talk about that, next on "tech check." the all new godaddy airo helps you get your business online in minutes with the power of ai... ...with a perfect name, a great logo, and a beautiful website. just start with a domain, a few clicks, and you're in business. make now the future at godaddy.com/airo

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welcome back. more big-name departures at openai, with some of sam altman's top deputies stepping down. altman put thing spin in italy today on the shakeup. >> i think this will be hopefully a great transition for everyone involved and openai will be, you know, stronger for it, as we are for all of our transitions. >> well, let's discuss that with deidre bosa joining us for "tech check" today with kate rooney, both out in san francisco. i'm glad you guys are both here. kate, maybe you can bring us up to seat on what exactly has taken place with this company over the past 24 hours. >> it's been a wild 24 hours, kelly. you had some high-profile decampments from openai, and it comes after basically the entire founding team, after openai was started, has left the company. so it's continue thing trend we have seen of top executives

leaving. that is part one. the other part of the reporting we have is that they are now in the middle of going from nonprofit to a benefit corporation, so this is a unique structure in corporate america. but it's quite common in ai, so anthropic, openai's rival out of here, is a public benefit corporation, so is xai, which is elon musk's rival to openai. it's -- they're heading in this direction, so they're essentially going to be a for-profit. as part of that, i'm told by a source that sam altman will get equity in the company for the first time. so a lot is going on. so those have been the headlines. >> deidre, you know where i'm going with this, to the original sin. that's what elon musk is saying, quoting someone on twitter who is talking about -- accusing sam basically of raising $50 million from elon to start a non-profit. tell everyone you're doing it

for humanity, raise billions, and convert to a for-profit and boom. a lot of people this doesn't sit well. >> he also called sam altman as swindler of the century. i was laughing at that sound bite you just played from sam altman, saying hopefully this will go as smoothly as the other transitions. i mean, what an understatement. the transitions have been wild. kate, explain what happened over the last 24 hours. that could fill months for most companies. elon musk is the loudest person in the room, but there's many people here in tech in silicon valley who wonder, who question sam altman's motives. they say he could be a visionary, he could be a snake oil salesman, that's what we really don't know. but when you have these companies, you're always walking the line between, you know,

being that visionary and playing fast and loose. >> if i might sort of ask the question this way, kate, is he -- you know, it's not so much about the motives. the motives are clear, to have a massive company, to have the next google or meta or what have you. the question is whether it's on the up and up. if they're still going to be, you know, sort of a shoe to fall about how they scraped all of this off of the internet to train these models, and can the company just continue to outrun those allegations? >> i think that's a great point, kelly. the other thing i would bring up, the moment we're in, this vulnerability in a time that is key for openai, when there's a lot of competition, they're fighting off google on one side, meta, anthropic. so they need top talent. the things you need to win in ai is talent, data, computing. so they've got deep pockets now, the fund raising is key to get the other side of it, to get the amount of computing power that they need. but they also need the talent, so they can't afford to lose

some of these key technological minds to their rivals. investors are pretty happy with what's going on. i've been talking to people involved, say thing does not change the underwriting or the thesis and what this company is worth. they said basically this is the nature of the beast. you know what you're signing up for. decampments from openai are a new thing as we have seen over the past year. >> if it's a for-profit company and not a research arm, where is it getting its information to answer our queries? does it have the silence to do so, and how expensive will that license be going forward? >> and are they doing it safely, if the ultimate aim is artificial general intelligence. when this company was founded, and this is what elon musk is high highlighting, the stakes are so high here. here in california, they're looking at a bill that would make it necessary for generative

ai companies to have a kill switch that. is a real worry from people in the industry that are working on safety, and when sam atman was originally questioned in the past why he department have an equity stake in openai, he said the board needed a majority of disinterested motives with no stake in the company. the motive now is to become a big company like a google or apple. that's very, very different. this is a company like we haven't seen before, that pledged to create agi for all of humanity. that was the stake holder before they considered the structural change. >> it's, i think, still one to be grappled with, and this feels like the very beginning, each as they're trying to do the massive fund raise. thank you both. coming up, shares of estee lauder are popping following the china stimulus news. it is today's best performing

staple, and shares are on pace for their best week since 1998. other beauty names have been under pressure. we'll get a check on some other big movers next.

welcome back to "the exchange." we are seeing green across the board right now. near session highs, as well, which we're up 282 for the dow, and the outperformer today are the small caps. the russell 2,000s, being traced back to the slew of fiscal announcements announced by china last night. the dow and s&p are trying for their sixth positive week in seventh. the nasdaq on pace for a third week straight of gains. and the british government announced a 10 built pound deal

with black rock. our reporter just wrapped up his interview with the prime minister, who laid out his top priorities in office. >> you now have, we now have a labor government, whose number one priority is wealth creation. now, tit's counterintuitive, bu of course we want good public services. of course we want the national health service to work well. but the only way that will happen is if we grow the economy. so that is where the labor party that is proud to say that we are pro-business just as much as we're pro-worker. >> now you can layer in the uk to the list of companies ever lengthening who are trying to boost their economies, and you can argue their stock markets, as well. you can catch more on andrew's

fuel interview tomorrow on "squawkbox." coming up, starbucks shares up nearly 2% after an upgrade to jut perform at burnstein. the market has had a market perform rating on starbucks for more than two years, and it's more than just the ceo that has them bullish. the analyst joins us next to explain. cnbc is celebrating hispanic heritage this month. ♪ ♪ >> honest was founded by a latina founder and for me, as one of the first afro-latina ceos of a publicly traded company, it's so fun to lead a company where diversity and inclusion are a key piece of what we do. the celebrations we do of culture here really allow us to come together, almost like one gorgeous, colorful mosaic of a diaspora celebrating all of the beautyhamas o tt keusne.

welcome back to "the

exchange." starbucks getting a little boost today on an upgrade from bernstein. up about 2%. that firm expecting a grande sized comeback, quote, unquote, with ceo brian niccol now at the helm and while the turn around will take some time, it doesn't need to be completed for the stock to start working and that china could play a big part, perhaps it already is in today's trading session. for more, let's bring in danilo garguilo, covering the restaurant space at bernstein. we just had a downgrade from andy bearish, one of the first on the street to go negative on the niccol takeover. why do you feel that a turn around here is more imminent for the stock? >> i would say, look, everybody is excited about brian niccol joining starbucks. and so are we, from the first day. clearly the level of operational experience he brings to starbucks is going to be fundamental to the exaccelerati

of the stock. at the same time, when it was reported in the first month, since brian joined, maybe the street expectations were elevated on the timeline for the turn around to happen. as well as the implication for 2025, and specifically, in order for the stock to be reaccelerating, there needs to be some heavy level of investment in both people as well as capex. so that you can return on this investment starting 2026. i got much more confidence over the past month that at least on the buy side, the expectations for 2025 are much more limited than what i thought they were. most investors i spoke with are -- assume it is going to be a slowdown in '25. now it is probably the right time to get into the stock. >> let me ask you about china. a couple of weeks ago, the pertinent question to ask was whether starbucks should divest that entire unit. what were your thoughts on it then and what are your thoughts on it now and do stimulus

efforts play any role in brightening prospects for performance there? >> yeah, excellent question. i would say, i think that the presence of starbucks in china is still an overhang on the stock. and i say it because the outcome in china is uncertain. yes, we know it is going to be -- it is helping consumer spending behavior over time. but the timeline of that to happen is still quite uncertain. and at the same time, this overhang, the fluctuations in performance in china really bears some uncertainty on the trajectory of the stock because there are many investors in the u.s. who may not be willing to step in with the stock without knowing how the situation is going to be evolving in china. i think given the consumer uncertainty as well as the amount of competition that starbucks is seeing in china, finding some partnership or a

spin-off of starbucks china would be liberating the stock. >> so you still think a partnership or spin-off, and as you point out, despite making up almost 20% of the total ints, china's contributions are only 9% and 8% respectively. people might ask why would you spin off something you spend so much money into it. but if it is a small part of the business and an overhang, maybe you do. is that simply because of competitive pressures or might they look at it and say, listen, in five years, ten years time, that expanding middle class peter bookvart told us about, they could be starbucks customers who could help our comps and financials there. >> i positioning in china is still quite -- so far. the growth in china is coming from the market with the rise of coffee, and we do think there is a space for starbucks to be playing in china. right now, we see the consumer

discretionary spend is coming down. the growth and competition is still uncertain. it will be starting today to more positioning. and more importantly, i think investors would want to see management really focused on fixing the united states first before venturing in china, and, you know that would be leading to a faster acceleration of same store sales before you then have to think about china. and i don't know if there is enough patience to do both at the same time. >> that's a great point. as we see what companies like boeing who are trying to fight multiple battles at once, drains resources and it is exhausting. so if starbucks were to say we'll figure out what to do about china later, we're going to try to fix the u.s. business now, what would be the one thing, the one area that they would get the most out of so to speak for the attention and the dollars they might spend? >> in the united states you're referring to, right? >> yeah. >> yeah, in the united states i

think the biggest opportunity is to unlock the through put in the e-commerce operations and unlocking the experience in -- in other words, right now the starbucks store, the operations tend to be chaotic with many at times confusing with a lot of customizations that are at times creating bottleneck for baristas. and so i think the number one investment we need to be training, equipment rollout in the store as well as better store ambience to reattack the laxing consumers who are confused by the new direction of starbucks that was going much toward the direction of mobile and to go experience it. so how do you bring them back, reinvest in your store, reinvest in labor, reinvest in experience of consumers. >> i think everybody would agree with that. and we'll see how easy or difficult it proves to do. the stock is buy now regardless

or not regardless because the efforts will bear fruit. danilo, thank you for joining us. danilo garguilo. that does it for "the exchange." tyler is getting ready for "power lunch." it will be a busy one. i'll join him on the other side of the break. you'll find them in cities, towns and suburbs all across america. millions of americans who have medicare and medicaid but may be missing benefits they could really use. extra benefits they may be eligible to receive at no extra cost. and if you have medicare and medicaid, you may be able to get extra benefits, too, through a humana medicare advantage dual-eligible special needs plan. call now to see if there's a plan in your area and to see if you qualify. all of these plans include doctor, hospital and prescription drug coverage. plus, something really special, the humana healthy options allowance. your allowance. to help pay for essentials

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