What is going on with the stock market? It just keeps rising. To understand where the markets are going and how they are being influenced by some major macro-economic trends — like tariffs and interest rates, BBTW editor Peter Green spoke with Mike Reynolds, vice-president of investment strategy at Glenmede, an investment manager and private wealth adviser with $47 billion in assets under management.

On Tuesday, Fed chair Jerome Powell indicated more quarter-point cuts are coming, and then noted that stocks are “fairly highly valued.” What should we make of Powell’s remarks?

Mike Reynolds: Part of the Fed’s mandate is to monitor financial stability. It didn’t sound like he was overly worried to the point where it’s going to influence monetary policy near term. We have really full valuations in pockets of the market in the U.S., particularly large-cap growth stocks. That’s the portion of the market that gets a lot of headlines, your Mag-7*, your NASDAQs, your growth stocks. When we look beyond that, we’re actually seeing more fair valuations in the value corners, especially in small-cap, on a relative basis.

* The Magnificent Seven tech stocks are Alphabet$GOOGL ( ▼ 0.8% ) , Tesla$TSLA ( ▼ 4.29% ) , Apple$AAPL ( ▲ 1.86% ) , Nvidia$NVDA ( ▲ 0.35% ) , Meta$META ( ▼ 1.51% ) , Amazon$AMZN ( ▼ 0.85% ) , and Microsoft$MSFT ( ▼ 0.64% ) .

So we’re not yet at the irrational exuberance stage, like we saw before the tech bubble burst in 2000?

We don’t think so. We monitor sentiment very closely. If you were looking at investor surveys and levels of investor positioning like margin debt, options volumes, around the tech bubble [in 2000], you would have seen truly irrational exuberance. We’re not seeing that in the data yet. Sure, there’s a lot of optimism floating around in this market. But is it like pop-the-bubble sort of optimism at this point? I think that’s kind of a stretch.

How much more room is there to appreciate?

The upside there is a lot more limited than it has been over the past few months. If you are expecting material returns going forward, you have to have a thesis that the earnings are really going to be driving that. This year has been remarkably resilient from a profit perspective, especially for the S&P 500. It’s encouraging. You’re seeing smaller caps like the Russell 2,000 are starting to join that party, too, and Q2 is really turning a corner. That’s a part of the market where actually, we think we can see both profit growth as well as valuation expansion as a tailwind for small caps in particular. Looking at large caps, the valuations are looking pretty rich there, so you really have to see the earnings come through to justify those valuations.

What is driving some of those super valuations?

The thematic trade around AI has gotten a lot of traction. We see that the top seven companies in the S&P are now more capex-intensive than the top seven have ever been for that index. A hallmark of these companies just a couple of years ago was just how asset-light they were, free cash flow generating machines. The question now is whether you actually get a commensurate return on investment from that capex. And a lot of the demand projections for AI seem really rosy from our perspective. Those valuations aren’t priced for disappointment at this time.

Could this be like the browser wars, when there were a half dozen or more companies all jockeying to be what Google effectively became?

It very well could be a winner-take-all outcome when it comes to AI and adjacent industries. But one of the things we caution our investors about is that even if a technology seems obvious that it’s going to be disruptive, it’s not always obvious who the winner of that race is going to be.

What sectors do you think are fairly valued if you’re a long term investor?

The more obvious opportunity from our perspective is what we’re seeing in small caps right now. There’s three factors behind that. One is the valuations are at fair value from a historical perspective. The second piece is that earnings are finally turning a corner for small cap. Point three, policy is ramping up to be supportive for small caps. A large portion of the Big Beautiful Bill should disproportionately benefit small caps. For example, R&D expensing is a big benefit for small-cap companies. Enhanced interest deductibility is another one. And the other piece is Fed rate cuts. Small caps are a big beneficiary there because more of their debt is floating rate. So there’s still opportunity in that corner.

This interview has been edited and condensed for brevity and clarity.

—Peter S. Green

$GOOG ( ▼ 0.56% )   $TSLA ( ▼ 4.29% )   $AAPL ( ▲ 1.86% )   $NVDA ( ▲ 0.35% )   $META ( ▼ 1.51% )   $AMZN ( ▼ 0.85% )   $MSFT ( ▼ 0.64% )   $ORCL ( ▼ 5.67% )   $NWSA ( ▼ 0.2% )   $FOX ( ▲ 0.39% )   $DIS ( ▼ 0.41% )   $NYT ( ▲ 0.71% )   $KVUE ( ▼ 3.59% )   $JNJ ( ▲ 0.57% )   $FLYYQ ( 0.0% )   $PFE ( ▼ 1.83% )   $MTSR ( ▲ 0.1% )   $NVO ( ▼ 4.61% )   $LLY ( ▼ 3.82% )   $NPSCY ( ▼ 1.72% )  The usual suspects

• Nvidia Nvests in OpenAI: Chipmaker Nvidia $NVDA, now worth about $4.5 trillion, says it will invest about $100 billion in OpenAI, which the artificial intelligence company will use to buy Nvidia chips for an expanding roster of massive data centers. Despite the vast promise of AI, including a promise earlier this month to lease $300 billion worth of data center capacity from Oracle $ORCL, OpenAI is strapped for cash. Its most recent funding round values the company at $300 billion, so it needs to see massive revenue gains to meet its capital expenditures. “Nvidia invests $100 billion in OpenAI, which then OpenAI turns back and gives back to Nvidia,” Bryn Talkington, managing partner at Requisite Capital Management, said on CNBC after the announcement. “This is going to be very virtuous for [CEO Jensen Huang].”
• LMGTFY: After emerging largely unscathed from a Federal Trade Commission lawsuit seeking to break up Google $GOOG over what a federal judge ruled was its illegal monopoly on internet search, Alphabet’s Google now faces a new threat of breakup, in a trial before a different federal judge. Judge Leonie Binkema ruled that Google holds an illegal monopoly on web advertising, and now she’s hearing testimony on how best to end that monopoly. The Justice Dept. wants her to order Google to sell the advertising exchange that links buyers to sellers. While the search decision was affected by the rapid rise of AI-powered responses to online queries, the ad industry hasn’t been as affected by AI.
• Of course, it was a conspiracy: The Federal Trade Commission and seven states are alleging what as every single sports fan and concert-goer in America suspects, that Ticketmaster and its parent LiveNation $LYV conspired with ticket brokers to scoop up vast numbers of tickets to live events and then sell them at significant markup. In March, President Trump actually signed an executive order promising to crack down on ticket scalping. Ticketmaster’s “business model and bottom line benefit from brokers preventing ordinary Americans from purchasing tickets to the shows they want to see at the prices artists set,” the FTC said in a lawsuit filed in California. It’s asking for billions in refunds for overcharged ticket buyers.
• The TikTok ticker: Deal? No Deal? Even after Donald Trump said he spoke with Chinese leader Xi Jinping on Friday about a U.S.-controlled firm taking over the Chinese short video app, it’s not clear if there is a deal. Trump said last week a deal was sealed, but he just needed Xi’s approval. Xi countered that China is “glad to see business negotiations in line with market rules.” Well, one thing is clear: the expected winners.They include nepo-mogul Lachlan Murdoch’s News Corp $NWSA and $FOX, and emergent media mogul and nepo-daddy Larry Ellison, the 81-year old CEO of IT titan Oracle $ORCL . Oh yeah, and the U.S. Treasury. “The United States is getting a tremendous fee-plus—I call it a fee-plus—just for making the deal,” Trump said.

The media mirror

• Heeeeere’s Jimmy! Jimmy Kimmel was back on the air Tuesday night, less than a week after Disney’s $DIS ABC unit yanked his show from the air following a veiled threat by Federal Communications Commission Chair Brendan Carr. Carr suggested he’d intervene in the proposed acquisition of a group of ABC affiliate stations. It’s not clear what prompted Disney’s reversal, and Nexstar, the company whose $6.2 billion acquisition was threatened by Carr, says its 32 ABC affiliates won’t air Kimmel’s show. But with internet streaming steadily eating away at linear broadcast and cable markets, Disney may no longer care as much about affiliates carrying its shows. In fact, the one statement Kimmel said network execs asked him to make was to read the instructions for resubscribing to the Disney+ and Hulu streaming networks.
• Thrown out: Trump’s $15 billion lawsuit against The New York Times $NYT got thrown out of court for being “improper and impermissible,” by Judge Steven Merryday. The 85-page complaint alleging the Times disparaged Trump’s reputation as a successful businessman was just a litany of grievances, and didn’t even lay out the formal allegations until page 80, said Merryday. Trump has a month to re-file a much shorter version of the suit.
• New mogul in town: Oracle $ORCL co-founder Larry Ellison, a friend and admirer of Trump, is close to becoming one of the mightiest media moguls in the U.S. Through his son David, he’s acquired Paramount and its CBS news organization. He’s tipped to be a shareholder in a U.S.-run TikTok, and with Paramount’s disclosure that it’s bidding for the flailing Warner Bros Discovery $WBD, he could soon be in control of CNN.
• Tylenol’s headache: There’s one CEO no one wants to be this week, and that’s Kirk Perry, the interim boss of Kenvue $KVUE E, the Johnson&Johnson $JNJ spinoff that owns Tylenol. On Monday, President Trump repeated false claims made by Robert F. Kennedy, Jr., linking autism to the use of acetaminophen, Tylenol’s active ingredient, during pregnancy. Numerous scientific studies found no link at all. Still, Kenvue’s share price crashed by about 8% before recovering about 6% the next day as analysts realized there was no new evidence to support Trump’s claims.
• Flyby: Bankrupt Spirit Airlines $FLYYQ says it’s going to lay off 1,800 of its 5,200 flight attendants as the beleaguered discount carrier scrambles to stay afloat. Spirit is in the middle of its second bankruptcy in less than a year, and says it will shrink capacity by 25% in November, as it seeks to cut $100 million a year from its labor contracts. The airline is beset by high-cost leases on its planes and tough competition from other airlines.

What do you think of Big Business This Week? Tell us how you really feel in this survey!

The short stack

• Sorority girls go viral: After the NCAA’s new Name, Image and Likeness rules let college athletes cash in on their fame, up next are sorority sisters. Videos by college sororities aimed at recruiting new members are going viral, earning cash and freebies for the dancers, turning some into influencers who can pay their college tuition with the royalties. For brands, sorority members become long-term loyal customers, and some sorority chapters have appointed members to be brand coordinators, soliciting and managing deals, the Wall Street Journal reports.
• Pfizer’s track back: Pfizer’s $PFE agreement Monday to buy weight-loss drugmaker Metsera $MTSR for $7.3 billion could be the long-suffering pharma company’s path to salvation. Metsera’s once-a-month injectable GLP-1 could grab massive market share from Novo Nordisk’s $NVO Wegovy and Eli Lilly’s $LLY Zepbound, which require weekly shots. Pfizer in April stopped work on its obesity pill, danuglipron, after signs it could cause liver damage. With an unpromising pipeline of new drugs, Pfizer shares are down 60% since peaking in late 2021.
• Screwed? The 50% tariffs that President Trump put on steel and aluminum imports are wreaking havoc on screw-making factories in Taiwan, the largest source of screws, nuts, and bolts for U.S. manufacturers. Some of the fasteners are specialty products used in high-speed trains and exhaust fans in data centers. Others are house-brand wood screws for companies like Home Depot. Tariffs have cut orders at one major factory by 20%, the New York Times reports.
• The Bergdorf billion: Department store owner Saks Global said it’s selling a minority stake in ultra-luxe retailer Bergdorf Goodman to pay down debt. Saks Global acquired Bergdorf when it bought rival Nieman-Marcus last year for $2.6 billion. The Wall Street Journal, citing sources close to the deal, said Saks is selling a 49% stake for about $1 billion, and potential buyers include a Middle East sovereign wealth fund.

Get Big Business This Week in your inbox every week—and read it before everybody else! Sign up today.

Trumplandia

• It’s gonna cost ya: Tech firms and hospitals hoping to hire expert programmers or hematologists from abroad to staff their growing companies will now have to pay the Trump Administration $100,000 for each new H1-B visa, according to new rules. Or they can skip the line by forking over a cool $1 million for a so-called Gold Card. The move, orchestrated by Commerce Secretary Howard Lutnick and intended to promote U.S. workers getting hired first, has upset tech firms, which rely on the visas to staff their companies. Last year 71% of H1-B holders were from India and 12% from China, and Amazon $AMZN was the top employer with 10,000 H1-B holders. President Trump sees this as a money spinner: “We’ll be taking in hundreds of billions of dollars,” he said. But with only 400,000 H1-B visa holders, that adds up to a max of $40 billion based on current numbers. Still, it could help the treasury’s bottom line: Goldman Sachs warned this week that companies evading the new Trump Tariffs could cost the Treasury $40 billion a year.
• Who’s worse for capitalism, Donald Trump or New York City’s likely next mayor, Democratic Socialist Zohran Mamdani? According to Wall Street Journal readers, Trump is a bigger threat to free markets. In the latest intervention in free markets, the Trump Administration’s commerce secretary, Howard Lutnick, told U.S. Steel owner Nippon Steel of Japan $NPSCY, to keep running a long-idled plant in Granite City, Illinois. Otherwise, Lutnick said, he’d invoke the Administration’s golden share and overrule the closure directly. The Journal’s editorial page said Trump’s tariffs are hurting U.S. manufacturing, with U.S. steel prices now twice the world average.