Bringing Back the Barbell, OpenAI’s Government Proposal, and Winter is Ending 7/2/26

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**Alex Kantrowitz** (0:26)
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**Kelly Evans** (0:49)
Thank you very much, Scott. Stocks are mostly lower now, after job growth was short of expectations this morning. It's the tech lagging again, though. That's the story of the markets today, the NASDAQ down more than 1%, and the Dow still green. I'm Kelly Evans, and welcome to The Exchange. Our market guest is among those reducing his tech exposure and expecting this market rally to keep broadening out. We'll talk to Drew Pettit about that in a moment. Plus, OpenAI has reportedly proposed giving the US government a 5% stake in the company. The arrangement would involve similar moves by other AI companies too. Our guests think this deal is either cynical or nonsensical. Alex Kantrowitz and Sam Lessin weigh in ahead. And that blowout Tesla number, Gene Munster says the EV winter is over, so why are the shares selling off? They're down 8% now. That's also coming up this hour. But let's begin with the markets, where the first half leadership in tech seems to be giving way to a broader rally. The equal weight S&P 500 is up about 12% this year, outpacing the 9% gain for the regular index. Small caps are up 20% while the CNBC Mag 7 is in the red. Drew Pettit is CN, Citi's US Equity Strategist. You could be CNBCs as well, Drew. It's great to have you here and welcome.

**Drew Pettit** (2:00)
Hey, good to see you, Kelly.

**Kelly Evans** (2:01)
So is there a relationship between the jobs report and the market pattern today, or is the pattern more about people like yourself, reducing a little bit of their exposure to tech?

**Drew Pettit** (2:12)
So tech is part of the story.
So let's just be real here. I can't remember the last time we were actually not overweight tech. So moving to market weight almost felt like this Herculean change in our sector recommendations. But look, longer term, we think the AI story and the build-ups intact. We just got to work through some of these supply chain choke points and concerns about ROI and demand for AI.
So tactically, it seems like a really good time to take some of the gains off the table. And broader market action, yes, some of the weakness in the job growth probably has people a little bit concerned. That's why you see, I would say, weakness in small cap and small cap value. It's generally risk off today. But to us, we think that's not really long lived. We like this idea of barbelling large cap growth and small cap value, two different types of risk in this market.

**Kelly Evans** (3:04)
People here have been pounding the table lately for small caps.
The narrative makes sense to me, except we've seen some headfakes before. Maybe this is the year though that they're finally proving they have some staying power. What are your thoughts there?

**Drew Pettit** (3:18)
It's all about the growth and the earnings growth inflection. I would say the headfake really started early last year. You started hearing a lot of other strategy teams talk about going long, small caps, but the earnings growth inflection wasn't there. That is actually here, and there's finally a little bit more conviction when you have rates coming down off of peak and oil coming down as well. So you have more conviction in a lot more of these small cap names, and the true cyclical names in small cap, actually seeing earnings growth turn positive.

**Kelly Evans** (3:49)
So there's a couple of different choices I think investors have about what's going on with tech.
It was for a while the semis outperforming in the Mag 7 was old news. It was the lag 7 Now everything is trading a bit heavy depending on the day. As I think Tony Pasquerello put it last Sunday, prescient comment coming in to this week again. He said, the AI trade is getting more complicated. Look at the memory names down again today. Look at the SMH down five or 6%. So what do you think is going on there? Is it going to get a lot worse?