CNBC The Exchange
2026-05-04 · Hosted by Kelly Evans · CNBC
Executive Summary
The S&P and NASDAQ wrap up their best month in six years, with the S&P up 10% in April. Western Digital CEO Irving Tan walks through the storage super-cycle — demand growth raised from 25% to 30% CAGR, gross margins at 50.5%, pricing up 9% with room for more. The Sandisk spinoff (now up 1,200%) and Western Digital (+400%) timing was prescient. Wolf Research notes 70% of S&P returns from March 30 lows came from just 10 large-cap tech names — but Piper Sandler’s Michael Kantrowitz disagrees, citing strong small-cap tech performance and broadening earnings breadth. Oil down to $101 on Iran response to US peace draft. Pentagon expanded classified-network AI deals to 7 firms but Anthropic still blacklisted over MIThos cybersecurity model concerns. CBOE Global Markets reorganizing — cutting 20% of workforce, divesting Australia/Canada exchanges, leaning into derivatives and planning to enter event contracts (prediction markets).
Key Stories & Changes
1. Best Month in Six Years
S&P 500: +10% — Best month in 6 years
NASDAQ: Best month in 6 years — Apple +5% on May 1 alone
2. Western Digital — Storage Super-Cycle
WDC: Western Digital — -2% post-earnings — Beat; gross margin 50.5%; demand growth raised from 25% to 30% CAGR; pricing +9% with capacity for more
SNDK: Sandisk — — — Up 1,200% since spinoff in February
Spinoff timing turned out prescient — both companies created singular focus
Storage demand drivers: AI model training, inference (now 2/3 of compute workloads), physical AI (autonomous vehicles, robotics)
Higher capacity drives prioritized over unit growth to meet customer needs
Plans to introduce higher-capacity drives in H2 2026
Gross margin expansion runway “ongoing”
3. April Rally Composition Debate
Wolf Research: 70% of S&P returns from March 30 lows came from just 10 large-cap tech (Alphabet, NVIDIA, Amazon)
Piper Sandler / Michael Kantrowitz: Disagrees — points to small-cap tech up high double digits YTD; large-cap growth only +5-6% YTD; small caps up 14-15% YTD
Kantrowitz cites broadening earnings breadth, improving manufacturing PMIs (globally and domestically)
ISM still expansionary but Prices Paid at 22-point worsening — highest in years; some pull-forward inventory build mentioned
Kantrowitz wouldn’t rule out 8,000 on S&P this year if oil prices fall and Strait reopens
4. Oil Tumbles on Iran Response
WTI down ~3% to ~$101 after Iran sent response to US draft peace agreement
Brent off recent highs but markets still scratching heads at equity disconnect with energy
Neil Ferguson piece cited three explanations: market sees war ending by end of May; market loves AI more than Hormuz closure; or market is clueless
Kevin Book (Clearview): GDP oil intensity down 18% in 10 years, 43% in 25 years — mutes economic damage
Three-to-six month lag on top-line consumption hits from oil shocks
Strait still trickle-only with US blockade stopping Iranian cargo to China
5. Pentagon AI Deals — Anthropic Excluded
Seven new AI providers in classified networks: NVIDIA, Microsoft, Reflection AI, Amazon, OpenAI, SpaceX (with xAI), Google
Anthropic blacklisted — Pentagon CTO Emil Michael says reliance on single partner was “irresponsible”
Anthropic designated as “supply chain risk” earlier this year — unprecedented label for US company
Anthropic claims hundreds of millions in lost business; CTO Dario Amodei met senior officials recently
Multiple government departments still using Anthropic technology
Concerns include MIThos model’s cyber-vulnerability finding and patching capabilities
6. CBOE Global Markets — CEO Craig Donahue Interview
CBOE: CBOE Global Markets — +~8% (best day since April 2020) — Beat earnings; raised FY revenue guidance; 20% workforce cut; selling Australian and Canadian exchanges
Q1 strong; pivoting to derivatives growth
Zero DTE (daily expiration options) at ~3M contracts/day
Half of zero DTE volume now institutional (up from retail-dominant)
Plans to enter event contracts / prediction markets in summer/fall 2026
Crypto: “here to stay”; CBOE will pursue crypto products
Tokenization, perpetual futures, on-chain settlement seen as next growth frontiers
7. April Winners Recap (with Victoria Green)
INTC (Intel): Best month ever; market cap nearing $500B; A14 fab progress; partnerships with NVIDIA, Tesla, US government — “still in middle innings”
GOOGL (Alphabet): Best month since 2004 (+34%); Google Cloud “exploding”; vertically integrated AI strategy
CAT (Caterpillar): Tractor + AI infrastructure play; tier-4 data center backup power critical (max 30 min downtime per year)
Trends Identified
1. Storage Becomes the New AI Bottleneck
Western Digital’s commentary on 30% CAGR demand growth, with margins above 50% and 9% pricing, makes storage the latest beneficiary of the AI capex wave. Critically, storage data is persistent (not recyclable like compute/memory) — every inference workload generates more data that must be stored permanently. This sets up a structurally compounding demand profile that differs from compute.
2. Anthropic’s Government Standing Becomes Strategic Risk
Anthropic is now the only major Western AI provider explicitly excluded from classified Pentagon work. Combined with the “supply chain risk” designation, this creates a meaningful business overhang and potentially threatens its competitive position in defense/intelligence. The political dynamic is complicated by ongoing Anthropic-government dialogue, suggesting eventual rapprochement is possible but not assured.
3. Market Rally Has More Breadth Than Headlines Suggest
The Wolf Research vs. Piper Sandler debate on rally composition reveals an important nuance — top-line “concentration” arguments understate small-cap and mid-cap tech strength, manufacturing breadth, and global PMI improvements. This matters for the durability of the rally, which Kantrowitz believes is structural rather than narrow.
4. Equity Markets Pricing Iran De-escalation
The S&P at records with WTI at $100 implies the market believes the war will end by end of May, that the AI trade outweighs oil concerns, or that economic damage is delayed enough to not matter. Kevin Book’s analysis suggests at least the third is partially true given lower energy intensity, but the metaphysical “uncertainty discount” remains.
5. Exchanges Pursuing Event Contract Frontier
CBOE’s planned entry into event contracts validates the prediction market thesis as a genuine new asset class. With its existing Zero DTE infrastructure (3M contracts/day, half institutional), CBOE has a meaningful head start over standalone prediction platforms. —-
Sentiment Analysis
Overall Market Sentiment: Bullish with Conviction
The dominant tone is constructive — recent records appear earnings-supported, with multiple speakers pushing back on bearish narratives.
Risk Factors Highlighted
Iran Conflict Persistence: Strait of Hormuz still effectively closed; US blockade maintaining stress.
Anthropic Government Exclusion: Hundreds of millions in business at risk; regulatory designation creates lasting overhang.
Oil Pass-Through Lag: 3-6 month lag on consumption hits from oil shock — risk emerges in Q2/Q3.
Strategic Petroleum Reserve Depleted: ~400M barrels needed to refill; supply absorption capability reduced.
Pull-Forward Inventory Build: ISM new orders show inventory pre-build ahead of potential tariff impacts.
Prices Paid 22-Point Worsening: Highest in years — suggests sticky cost pressures.
Iran Escalation Risk: Trump messaging including AR-15/missile imagery doesn’t rule out further military action.
Memory Cost Apple Headwind: Tim Cook flagged increasing impact in H2 — potential customer pushback risk.
Western Digital Manufacturing Capacity: Analysts worried about capacity vs. demand — supply tightness for now.
Anthropic MIThos Cyber Risk: Government concerned about model’s cyber-vulnerability finding capabilities.
This episode was covered in today’s The Market Signal — 2026-05-04, a cross-source synthesis of multiple podcast reports.