Closing Bell Overtime: Markets End a Wild Week With AI Under Pressure 11/6/26

0:00I'm Mike McNerney, Equity Investment Strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future together. With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discover.com slash 5 for details.

0:41The Bell's bringing an end to the trading day and the trading week at the NYSE. The Aspen Institute doing the honors, not the NASDAQ. T-Rex Bio closing out the day. Welcome to Closing Bell. Over time, live from Studio B at the NASDAQ Market Site. I'm Melissa Lee along with Mike Santoli. Stocks clawing back from yesterday's massive losses as tech saw a modest rebound. The Dow, the only index, closing in the red off about 250 points. S &P 500 up about a quarter of a percent. NASDAQ higher by a little bit more than 1 percent. Despite the move higher, the NASDAQ ending the week lower by nearly 3 percent, imposing its longest weekly losing streak since March.

1:14Semi's seeing a bounce, the big gainer up 10 percent. Memory, however, not able to catch a bid. Seagate and Western Digital ending lower for the week. Both stocks down more than 27 percent. The AI energy sector bouncing with GE Vernova, Eaton, Vertiv and Oklo all higher. Positive results from IREN lifting sentiment around the neocloud trade with the stock rallying 20 percent, lifting CoreWeave and Neviast. All of those stocks down substantially for the whole week. Staples following through on yesterday's sell off. The worst sector today, the dollar stores, General Mills and McCormick, the big losers there.

1:50Some big earnings movers today, a beat and raise for Airbnb and Moderna sending those names higher, a firm lowering a credit overhang. Lift in the red as bookings growth slowed in. Take a look at SpaceX with a solid 8 percent move to the upside. Elon Musk speaking at the Ron Barron conference earlier today, saying SpaceX sees annualized revenue about 500 billion dollars by December 2027. Let's get the first take on the close. What a week. For today, at least, there was an effort to make up some of the ground. But put it into context, I mean, semiconductors higher by more than 4 percent today, but still down like 12 percent for the week.

2:24Yeah, not a very energetic effort. We didn't really settle anything today. If you can take one signal out of the action, it was that at least there wasn't as much of the kind of forced selling and liquidations and the reports like yesterday of, you know, kind of hedge funds under stress and things like that. So some of the selling dried up. I don't think we necessarily reach that kind of washout where it's like, close your eyes and buy. It doesn't matter what the news is. But if you believe, as I do, that this is an A.I. bull market and you need that general part of the market to reassert itself, to kind of stave off the sort of late cycle stresses that we have out there.

2:58It didn't quite do it, although hyperscalers as a group up appreciably during the week, not just on the one day after the election. So it does seem as if the market is trying to reach for the sustainable fundamental stories here. Right. But I guess the question about the fundamental story is what is it going forward? And so you can you can point to all sorts of data points in terms of tech valuations now being, you know, 40 percent or whatever the percentage is off of their highs. But the question is, were they ever supposed to be at those highs when all the euphoria was priced in? I mean, that's sort of the question here as we sit here facing moratoria.

3:32And there's the questions about how it's going to attack core businesses like in Alphabet's case. Exactly. And the market is really for months now been saying the earnings are either not sustainable or they're pulled forward or we can't quite rely on them because otherwise they'd be paying up for these earnings more than they are right now. You wouldn't see the valuation compression. I guess if you have a fundamental view strongly held that that's wrong, then things are getting cheaper. You know, Micron's under four times forward earnings. If the market believed the earnings, it wouldn't be under four times.

4:01Or if they didn't believe there was going to be a real bad down cycle after next year, they wouldn't be at four times. But Micron's price to book value is also back to the five-year average now. It's not excessive anymore. So I do think there's interesting back and forth in the market that we can debate. And then even NVIDIA with the pullback this week. Exactly. It was trading under the market multiple for a long time prior. So it's like, what is the right data point to point at in terms of correct valuations here? Well, as you mentioned, the Nasdaq in the green today, but much lower since Monday, down over 3%.

4:31since then and posting its fourth straight negative week. So could this be the start of a real slowdown in tech or is this a good buying opportunity? Joining us now, Stephen Whiting, he is co-CIO at the CIO Group. Stephen, great to have you with us. Thank you. You're on Risk Watch Vigil. Well, you know, again, the pessimistic side of this is I still sense that people are overestimating what long-run profitability for tech hardware will be. I think the shorter-term story is Tuesday's election isn't going to mean that tech hardware spending falls next year. I mean, I see you got my document, and it shows we have 100 % growth in construction orders.

5:09We have plans for companies that have really reasonable cost of debt capital showing 48 % growth next year. And if you think about what just happened to semiconductors through yesterday, they've had 2 % gain over the past 12 months. Earnings are up 135%. And so if they grow 60s type EPS next year, it's ridiculous to think that they won't participate in some sort of recovery. So we can worry about further out into the future. But there's a lot of what's going on in technology where I think that this is looking like just a warning sign. How much does the story depend to whatever degree on the Anthropic IPO getting done?

5:52In other words, is that going to either be a message that the capital markets are still believers in the long-term story and this particular company and very important customer for everybody is going to be able to make good on the orders? I think it's important, but it's so much more the interesting story. If, like, we talked about the Internet and said, well, God, that fiber optic was so great. No, we think about what we've done with, you know, again, everyone in the world communicating this way and the importance of it. So Anthropic is the AI trade. And you think about memory and you just said, OK, it's cheaper, but how many trillion dollar memory stocks can you have?

6:29And that, this build out is a once in a generation investment. I think it's continuing. I don't think that this is the top of that piece of the economy. But it's so much more interesting as to what the future of AI services are and what we're going to do with them. So it sounds like you think the opportunity has kind of moved then away from semis a little bit and into anthropic if it hits when and if it hits the market, but hyperscalers and those who use it. So we've been for a long time really more focused on software. We're in love with cybersecurity and what AI means for that, for good or bad, and a little worried about semis.

7:09And we cut in May and we went neutral on equities in August. And maybe that wasn't enough for this moment like yesterday. But when we're thinking about technology now, there's probably some more opportunity here for investors. I think at CIO Group, we're also thinking, you know, we just had Staples have a 20 % return on 5 % DPS growth. So some of the defensive trades that we naturally look at, you know, again, they've also moved in the other direction, maybe a little too much. Yeah, it seems as if those violent rotations have been more mechanical than really fundamentally based, and that's some destabilizing effect on the overall market.

7:49What do you make of this thought that the market, at least in a fitful way, is trying to go from hyper-concentrated on the AI momentum to something more balanced? And maybe the economy is also theoretically going to go in that direction, too, if the AI CapEx momentum slows. Well, it's two things. Fortunately, we're not talking about memory chips alone being like tulip bulbs. But on the other side of this, the narrowing of the market is in part monetary tightening. And going from 2021 to 22 was a harsher version of that. But when you take a look at Microsoft's cost of capital, it looks to be about debt capital.

8:31It's about 10 percentage points below core weave. you have to start to think that this is going to focus in on, you know, the work that can be done, that can be financed, and not necessarily anything and everything that everybody has dreamed up in terms of AI data capacity. I mean, it should theoretically mean that the compute that's already in place among the hyperscalers is worth more. Yes. If there's going to be a limited bill that way. Absolutely. Did you find any opportunities this week in particular? Are you looking? We are. And it's not the moment that, okay, Monday couldn't be a down moment or something.

9:01But I just think, you know, the hyperscalers performing better with, you know, again, having a nice valuation constraint, you know, put on them by the market in a little while here. And again, some of the defensive trades, again, probably rallying too much. And look, we've loved health care as, you know, the antidote for the day-to-day volatility in tech. And the truth is they've outperformed their earnings, but the earnings estimates still grow a lot. I'm a little more worried about, you know, again, the companies that are just like a Clorox that people go into. I would rather go into the bond market because there you can, in fact, offset, you know, when the real downturn comes.

9:41That's where the market's going to rally. Yeah. Bonds as opposed to bond-like stocks. Yes, exactly. Stephen, good to talk to you. Thank you. Great. Thank you. Thanks for having me. Let's turn to the economy, broadly speaking. in the October jobs report coming in well above estimates, plus more than 80 ,000 upward revisions from past months as well. After a drop in expectations for a December rate hike yesterday, investors betting once again that the Fed will lift rates, with expectations now at nearly 80 % for a hike next month. Joining us now is Moody's Analytics Chief Economist Mark Zandi. Mark, good to see you.

10:17Normally, you get a nice upside surprise on a Friday jobs number, You might have expected a little more of a reaction, I guess, in bond and stock markets, but we're distracted by other things. What does it tell you about the macro backdrop? Well, Mike, it was a really solid report. I mean, surprisingly so. I mean, you know, there's a lot of noise in the report and it overstates the case for strength in the economy and the labor market. But it's making a pretty strong case that the labor market's in pretty good shape. We're creating at least enough jobs to maintain unemployment, low unemployment and labor force participation.

10:55And, you know, unemployment is pretty close to full employment. So it feels pretty good. But again, you know, last month we were talking in a very different way. The job numbers were very weak. Everything looked pretty ugly. This this month, it looks really very good. So the reality is probably somewhere in between. But, you know, I'll take it. It's a solid report. All right. So does it make the case for a Fed hike in December? You know, I think they're ready to go. I mean, inflation still remains elevated. We're going to get a CPI number next week, so that may weigh in. And it feels like we might get a pretty good core CPI number.

11:29It looks like that's going to decelerate, take some pressure off the Fed. But at the end of the day, I think, you know, if you listen to the Fed speak, members are still very nervous about the high rates of inflation. And now with this jobs number, I think they feel like they've got latitude to raise rates. So I'd be pretty surprised with the markets. I think there's very high probability they hike in December. I'm less sure about that next year. My sense is that the labor market and economy are going to soften here, given the higher interest rates that we're now experiencing in the weaker stock market.

12:03So I think that'll take some of the steam out of the economy. And I think in places it's going to come in, assuming Iran more goes in the right direction as opposed to the wrong direction. So this might be one more rate hike. And that's the end of it. If not, maybe another rate hike or two in 2027. If you go back a month or six weeks, it was a pretty clear story of maybe the Fed has to be aware of an overheat. whether it was AI CapEx driven overheat, you had the Treasury yields were kind of going to these multi-year highs and a sense that they needed to restrain parts of the economy. Since then, since they did hike and now we expect maybe one or two more, the financial markets have put their own restraints on things to a fair degree.

12:44How does that fit into, I guess, both the growth outlook for next year and monetary policy? Yeah, that's a good point. I mean, fixed mortgage rates over 7 % has really done a number on the housing market. And, you know, that's gone into, it was in a deep freeze before the 7%. Now we're kind of frozen solid. Commercial real estate, anything interest rate sensitive is really taking it on the chin. And I think, you know, the weakening in AI stocks is in part related to high valuations combined with higher interest rates. And that puts pressure on prices. And that's come in as well. And the stock market, I mean, if you look at the S &P, you know better than I, has essentially gone nowhere now for the past six months.

13:23So that should take a little bit of steam out of wealth and consumer spending. So yeah, I think you're right. I think the markets have responded and that should take a little bit of a notch out of the economy and help forestall future rate increases by the Fed. In terms of how you think about economic growth, Mark, I mean, when you do the exercise of if data center growth, if the build out is actually constrained by X percent. How will that impact the economy, whether it be GDP or the labor market? How do you think through that exercise? Well, in the near term, I mean, that helps on the inflation front, right?

13:59Because the AI boom, both in terms of the CapEx and in terms of the wealth effects because of the higher stock prices, is really juiced growth and contributes to the higher inflation. I mean, if you look at consumer expenditure deflator inflation, it's up about a quarter point three tenths of a percent above a year ago because of AI. That goes to electricity, that goes to the chips, which goes into consumer electronics and everything else. So, you know, AI kind of cools off here, which it feels like it's doing. It takes some of the pressure off inflation, makes it a little easier for the Fed to navigate going forward.

14:32We might not need to see the same number of rate hikes going forward. Longer run, I think it's also therapeutic. I mean, it felt like to me, it still feels like to me the market, the industry is getting ahead of itself. I mean, we do some fair amount of forecasting around AI investment because that's so key to the macro economy. Kind of do the numbers and you look at the assumptions. You got to make some pretty heroic assumptions about demand and compute and cost of capital and financing and everything else to make it all work out. So, you know, it does feel like, you know, if things cool off here, it makes it less likely we suffer a bigger shakeout down the road.

15:11So cooling off here might be the best thing for the economy and for the AI industry here in the near term and in the longer run. Yeah, obviously, a little bit of a mid-cycle reset, if that's what we're lucky enough to have, is often useful. Mark, good to catch up with you. Thank you. Yeah, anytime. Mark Zandy. All right. We do want to show you intentional sports ringing the closing bell at CBO in Chicago, ending the regular trading day today for options. The neocloud stocks have been wrecked lately as concerns mount over the A.I. buildout trade. And while the pressure abated a bit today, the real test will come next week when CoreWeave reports.

15:50Seema Modi has more on that report. Hi, Seema. Hey, Mike, putting it lightly there on under pressure. Take a look at the way these stocks have performed in recent weeks. They've been down significantly, selling off on concerns around how the neoclouds will be able to finance future compute deals. This as Microsoft has decided not to renew one of its cloud computing contracts with Oracle, in which Oracle was leasing Microsoft's older-dated A100 chips. That's according to sources we spoke to, who also share that Microsoft is actively looking at shrinking the number of neoclouds it partners with as it doubles down on its own data center strategy.

16:26A spokesperson telling CNBC that the company's infrastructure strategy is built on flexibility. Now, the three publicly listed neoclouds all use Microsoft's AAA rating to secure loans. And earnings next week from CoreWeave and Nebius will provide an important update on its relationship with arguably one of its most important customers, Iron, last night disclosing on its earnings call that it did handle, it handed over data center capacity to Microsoft in August. But Microsoft then requested a networking equipment upgrade that pushed back the timeline to around January of next year. So it's clearly a situation where this relationship now is being tested and the market wants more updates, guys.

17:06I think this seems to also raise questions about the value of the older GPU, SEMA. I think for a long time there was concerns that these GPUs would become obsolete. And then there's, you know, thinking that the GPUs are in such tight supply that they will remain useful for longer. but here Microsoft has been winding down these deals because it doesn't meet their specifications for what they need these chips to do. Yes, and how the recent market complexity and the need for the most high-performing GPUs, it tells us that the market has become much more critical of the types of contracts these hyperscalers have and what type of chips they are using.

17:42Of course, back in January, the situation seemed to be customers would be buying any type of GPUs, But perhaps the market is turning. And of course, to your point, it brings up the whole idea of the shelf life of GPUs. Seema, thanks. Seema Modi. Shocking to everyone. That is what Stifel is calling DraftKings' massive spending plan in the stock's huge decline today as shocking investors. Details straight ahead. And later, an AI trade skeptic weighs in on whether the recent tech sell-off is overdone. Closing Bell Overtime. Be right back. Did you know that psoriatic arthritis may progress over time and could cause permanent joint damage if left untreated?

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19:36Discovery.com slash five for details.

19:44Oh, look. You just got added to a meeting about coordinating another meeting to prepare for the pre-meeting ahead of the follow-up meeting, which will, of course, require a recap meeting and then another meeting. Hit your booking point. Book with Southwest and enter airplane mode.

20:35This year, the company remains number three in the predictions exchange by volume behind Calci and Polymarket. I mean, spending this much money goes back to the early days when they started. They were spending so much money in promotional activities in order to just land grab customers here. So people are like, what are you doing at this point? Right, because the story had become, guess what? It might be more rational in the states where sports betting was allowed and they were not going to have to give away quite as much. So kind of a give up trade there. Nobody quite knows the landscape with the prediction markets, everybody horning in on everything else.

21:07Now, DraftKings wants to say it's kind of, you know, they win either way, right? If prediction markets are curtailed from sports betting, they still have what they have and they don't have to spend. But I'm also wondering if the analyst was trolling me with the bingo card comment, knowing it's one of my pet peeves. Obviously. Because, yeah, you would think. Yeah. Because, yeah, because nobody chooses their bingo card, right? Right. You get the bingo card with the numbers on it. Right. Right. It's not like, oh, I didn't expect this. Right. You don't expect any of it. All right. As long as we're on the record with that.

21:37I'm with you. Thank you. A new health care plan is becoming more popular. Health savings accounts. The accounts have often been compared to a 401k for health care costs. Savers contribute pre-tax income while investing it in certain parts of the markets and then spend it on qualified medical expenses without paying taxes, at least not till down the road. HSA assets reached nearly$192 billion this year. It's a 20 percent increase in total assets year over year. So these are accounts that only go with these qualified plans where they're already kind of a high deductible. So it's a little bit of a perk and they can roll over each year.

22:13And reports of basically people using it as fun money. Sure. You can trade it however you want. There's all these little pockets of the tax code where it does seem to create these little sheltered vehicles to accumulate, you know, tax deferred winnings. Yeah. For quite a while. Yeah. Without intending even to spend it on health expenses. I think the key to remember, though, is that if you all of a sudden end up in the hospital, you may not have that money anymore. That's right. Because stocks are just as volatile in these accounts as they are out of the accounts. Right. And in fairness, I mean, a lot of people do just keep it in cash deposits.

22:47Of course. So it's not like everybody is actually trading it. But it is really fascinating that why not? You know, if you can trade it, people trade it. Up next, why power estimates for data centers could be highly inflated and the potential impact that could have on the future of the AI buildup. Closing bill overtime. With the Discovered Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants.

23:26It pays to discover. Terms apply. See discover.com slash 5 for details. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. You know, Kevin, sometimes I feel like computers are the only thing around here that are getting smarter.

24:05Yeah, my model hasn't had an update in a while. But that changes now. We think that we can smarten these listeners up about all things related to this crazy new future. Welcome to Machine Gods, a new NPR podcast that will be your guide to the AI future. Twice a week, we're going to help you get smarter about AI so you know what's real, what's hype, and what you should probably install on your phone. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

24:36Welcome back. Not only was it a bad week for stocks, it was a bad week for oil as well. Brent crude closing, posting its biggest weekly drop since April 2020, falling about 17 percent. As the midterm results raise hopes for de-escalation in the Middle East. Crude not faring any better, off 13 percent this week. But rapid in group, rapid in group, I should say, President Bob McNally warning the risk isn't gone, putting an 80 percent chance of fighting resuming in Iran and oil climbing back above$100 a barrel. Well, speaking of energy, new questions are being raised about data center power usage estimates.

25:08Pippa Stevens has all the details. Hi, Pippa. Hey, Mike, so it's being called Phantom Load. Now, put simply, when a developer begins planning for a data center, they have to get in line with the utility in order to get access to the grid. And sometimes companies aren't sure where they will end up building the data center, so they get in multiple lines. That means some of the power estimates out there are far too high because they're counting the same project several times over, which is where the name Phantom Load comes from. Now, across the U.S., the data center backlog sits at 1 ,040 gigawatts, according to utilities reported pipelines.

25:42But data from Wood McKenzie shows that fewer than 30 % of those are high confidence projects. And nowhere is this a bigger problem than in Texas, where the queue has stretched to 474 gigawatts, 90 % of which are data centers. And to put that number in perspective, that's more than five times the state's all time system peak. And that's what led Governor Abbott to institute the pause on new applications. And we did hear from Texas based power company Vistra this morning with CEO Jim Burke saying, quote, it's different to have one data center somewhere in the area. But if you think 10 are coming to your area, which is what happens with these overstated queues, you get a reaction.

26:22Now, we're already starting to see utilities implement stricter criteria in order to secure a spot in line. And guys, that's probably something we're going to see even more of looking forward. It's fascinating, Pip. It makes me wonder as we go kind of down the logic chain here, whether other estimates of what will be needed for data center capacity are also inflated, right? And whether it's the electrical equipment, all the, you know, all the other ancillary things that people assume, you know, is sitting out there in the pipeline somewhere. And really, if it's just kind of a matter of contingent planning or double ordering.

26:57That could certainly be the case. And I think the reason why it's so evident in some of these power numbers is because that's the first thing you're going to secure. We've heard from all these hyperscalers and data center developers that access to power is basically the top thing they look at now, since that can take the longest amount of time and can be hardest to secure. And so that's why these numbers kind of upfront have inflated so much. But we're hearing more and more post midterms that this is a necessary shakeout for the industry. And there really did need to be kind of this rethink about how we approach data centers looking forward.

27:27And there's no question that we are going to see many more built out, including in Texas. But again, it's thinking about how do you make sure that local communities and stakeholders have a say in the project and make sure that they're getting some sort of benefit from having that data center in the area. But clearly there was a huge knee-jerk reaction in the market this week. And it seems like once things settle down and we get more indication of just the speed and scale of data center buildup, then there will certainly be trickle down effects, including for electrical equipment, even things like critical materials.

27:57And when it comes to things like copper, all of those estimates, I think we might see come down a little bit. When we think about phantom load, are we also factoring in the bring your own power projects, which theoretically wouldn't be counted toward that? Yeah. So those are not being counted in a lot of these phantom load estimates. And so that's the route that a lot of hyperscalers have said, oh, maybe that's the fastest way to get a grid hookup. But then you typically, if you are a data center, given that you need to have that 24-7 reliability, the majority of the time it also makes sense to have that grid connection.

28:28Maybe you have some backup generation on site. But there have been just so many creative proposals put out there for how we are going to make sure we have enough power and have enough resources. And so whether or not you go behind the meter or front of the meter, I think all of this backlash towards data centers is really focused on the speed and kind of just figuring out the best process going forward. So we will certainly have some behind the meter, some in front of the meter, but clearly people are saying we want to make sure we approach this a little bit more thoughtfully, given kind of how quickly this theme took off in the last six months or so.

29:01Pippa, thank you. Pippa Stevens. Time now for a CNBC News update with Julia Boorstin. Julia. Melissa, Cornell's Faculty Senate issued a vote of no confidence against university leadership over its handling of sexual assault allegations. The governing body took up the issue after a former student alleged she was sexually assaulted and forced to take drugs at a fraternity house in 2024, in a case that has drawn increased scrutiny after drawing national attention. A former OpenAI engineer has pleaded not guilty to accusations that he bugged the company's San Francisco office. Federal prosecutors say Abdul-Ramin Al-Fozan, a Saudi national, hit a recording device behind a television in an executive conference room.

29:43Prosecutors say he communicated with a member of the Saudi royal family, but have not accused the Saudi government of directing the alleged scheme. And Connecticut Senator Chris Murphy has been released from the hospital after suffering a stroke last weekend. In a written statement, the Democrats said he will spend several weeks at a rehabilitation center and miss Senate votes while he recovers. His doctor says Murphy is expected to make a full recovery. Back over to you. Julia, thank you. Julia Borson. Moderna shares surging after crushing earnings estimates, and health care keeps outperforming the broader market as investors seek safety.

30:19Up next, we'll discuss whether this sector has even more room to run higher. Bozenbill over time. Be right back. Fears that the AI trade may be unsustainable, prompting investors to rotate out of tech and into defensive areas like health care. The sector has been massively outperforming the broader market for the last three months, reaching record highs earlier this week. Moderna helping to lift the sector today. As shares jumped after reporting robust results that exceeded expectations, hiking its outlook for full-year sales growth, Moderna is the top-performing stock in the health care sector this year, up a whopping 760 percent.

30:51So can the momentum continue as Wall Street prepares for a Democratic sweep, which got drug pricing a central focus of the party's agenda? Joining us now to discuss Bernstein Senior Research Analyst Courtney Breen. Courtney, great to have you with us. Great to be with you today, Melissa. I want to obviously focus on the results first. And a lot of that was driven by international strength as well as COVID vaccine strength. Everybody, though, is I mean, investors are really excited about the cancer vaccine for melanoma and where else that can be applied. Can you sort of walk us through how much is in the stock in terms of, you know, what they actually have out there commercially versus what they have in the pipeline?

31:28Absolutely. I think what we can say with Moderna is you're absolutely right. Kind of INT or their St. Tismorin autogene, their cancer vaccine is really driving where the stock is heading at the moment. And I think the willingness to pay is represented or is representing the fact that this product is potentially going to be applied meaningfully outside of melanoma. We haven't yet seen that data, so we don't know if that's going to be the case. But I think there's ongoing optimism that that could be the case, as well as the fact that this mRNA platform can be applied beyond INT through other types of cancer vaccines or other mechanisms to deliver new therapeutic outcomes for other therapeutic conditions that Moderna isn't targeting today.

32:18So I think what's baked into the stock is a lot of kind of those assumptions going forward, not necessarily purely just a representation of what the melanoma opportunity where we've seen the phase three data is going to translate to. And Courtney, I mean, an interesting moment, I guess, for a lot of the questions to come around political and policy implications for the group, because big pharma, I don't know, ups 15 percent or something in the month preceding the election. A lot of that was sort of a defensive rotation trade, but surely a lot of good feeling about the fundamentals, too. So how are you sorting out all those influences as we look ahead?

32:56Absolutely. Now, there's a lot going on in the industry. And as you well know, all of these stocks also have their own idiosyncratic factors as well. So I think as we look at this, we see that there's a few different drivers in here. You look back at the end of last year and we saw all of the stocks in the sector re-rate somewhere in the one and a half, 1.7 times forward PE multiple as we shifted through the policy overhang from the tariffs and then MFN associated with then the deals that were done with the White House. So that's kind of one base that was set early in the year. Then later on throughout this year, we've seen this meteoric rise of the sector now hitting towards kind of multiple highs.

33:40And we think this is really a reflection of the fact that not only is the sector a better defensive option compared to some of your other considerations, kind of these other sectors that could get disrupted by AI, not necessarily perhaps behaving in the way that you would want defensively. But in addition, there's exciting innovation happening in science. There's exciting innovation happening for these companies. And if you begin to believe the real promise for AI, there's potentially a tailwind for this industry over the long run as well. And so when you put that together, we think that while yes, kind of there is a notion that Democrats equal bad outcomes on drug pricing for the industry.

34:22First, we're not necessarily in a blue trifecta yet, so there's a path to get there. But also, there are a lot of dynamics that are supporting this industry that are agnostic to kind of that drug pricing policy threat for the future. That's only a part of kind of this rating story. Given the runs that we've seen and the increases in valuations for a lot of the big cap names, Courtney, which ones do you think still have value? I noticed you like Eli Lilly, for instance, which is maybe one of the much more expensive ones in the group. Absolutely. Absolutely. I think, look, Eli Lilly is sitting in a really strong position, leadership position, when it comes to the obesity market, as well as the diabetes market, not just for today, but also for the future.

35:09When we look at kind of future drugs like retitrutide, like aloralintide, their amelin, they seem to be checking all the boxes when it comes to where might that competition, where might future innovation come from. The one big debate that I think still hangs out there over Eli Lilly is, do we have a path forward to beginning to see where growth might come from outside of obesity? Kind of where in their pipeline are we going to be able to go hunting? And I think importantly, they've got a capital market stay coming up on December 7th, which is going to help us understand their non-obesity or beyond obesity pipeline a lot better and be able to kind of value that more appropriately.

35:47And so I think that is an important catalyst for them, as well as the fact that 2027 still includes a lot of potential upside and uncertainty in terms of their earnings performance. We've seen them raise their guide for 2026 really meaningful in the range of about$10 billion over the course of this year. And as we look forward to 2027, we see the same kinds of uncertainty set up that enable that beat and raise tight platform to continue. Yeah, that's a formula that works well while it continues. Courtney, thanks so much for the time today. I appreciate it. Wonderful. Thank you. Up next, Unlimited CEO Bob Elliott, who has been very skeptical about the AI trade on whether today's dip buying is warranted or if more downside is ahead for tech stocks.

36:33And Bank of America doing a major about face on TripAdvisor, downgrading the online travel company to underperform from buy and cutting its price target to$8 a share from$15, citing slowing growth and uncertainty over its restructuring amid the upcoming departures of both its CEO and CFO. So closing bell overtime. We'll be right back. Welcome back to closing bell overtime. Stocks trying to find their footing today after a wild week that saw a tech washout yesterday with two and a half trillion dollars wiped off the Nasdaq. So is this a real reset or just a relief rally before the other shoe drops?

37:07Bob Elliott, co-founder, CEO and CIO of Unlimited Funds. He flagged this kind of risk weeks ago on the show, and he joins us now. Bob, good to see you. Good to see you. So the market is now applying some degree of skepticism to the AI-driven earnings growth and the sustainability of a lot of these trends that we've been, I guess, excited about for a while. It's a process that's been going on for months, maybe culminated in some heavy selling this week. Where does that bring us? Do you feel like the market is in a more rational spot or is it still at risk? Well, I think it's important to just, if you take a step back, recognize we still have valuations and expectations built into the AI trade that are relatively extraordinary compared to where we were nine months ago, a year ago.

37:55And while there's been some reversal, we have by no means unwound the mania in its entirety. But I think the thing that is more interesting about the market action right now is when what was a stock market entirely based on the AI trade starts to falter, how is that going to affect the rest of the economy? You know, we have an economy that is meaningfully driven by two things, AI-related investment, which is supporting earnings, and consumers increasingly disaving in response to weak income growth. And those things are reliant on continued strong asset prices. And so I think where we are is we're in this transition from recognizing the unsustainability of the AI trade to then the second order consequences of how the reduced asset prices associated with it will then flow through into real economy investment and spending.

38:47Could there be an intermediate stop along the way, Bob, sort of a Goldilocks scenario where AI slows down just enough just to take the pedal off of inflation and ease things up for the consumer? I mean, if you take a look at the semiconductor trade, yes, we have seen a drubbing, but semiconductors are still up by, what, 30 percent this year. So asset prices are still pretty good. I think that goes into what the expectations are. I mean, remember, the expectations are that NVIDIA is going to sell a trillion dollars of chips on an annual basis in 29. And, you know, it doesn't take much in terms of stalling of the AI trade to disappoint relative to those relatively extraordinary expectations.

39:29I think the problem here is that the AI investment boom is really so critical to the overall earnings boom. If you look at what earnings expectations are, they're expecting over 20 % earnings growth year over year, basically as far out as the eye can see. And without all that AI investment, you're not going to get that earnings growth. And if you don't get that earnings growth, then you're not going to get the type of sort of fundamental support, illusionary, but nonetheless perceived fundamental support for the stock market. And if you start to get the stock market to fall, even a little bit, like given how just highly levered and financialized households are these days, how sensitive they are to the stock market, particularly higher income households, the result is that they could start to cut back their spending.

40:18And I think we're in that transition point where, you know, you basically you can't have a situation where there's not an AI investment boom, and you still have asset prices at these levels. And if you don't have asset prices at these levels, you're going to start to create a real drag on the real economy. This unsettled period in equities, Bob, and, you know, sort of minor risk off phase, it has come over the last month with a very strong rally in treasuries. So we do have the 10-year yield down from like five and a quarter when we had John early October down to, you know, 45 or something like that.

40:50So it felt like, it feels like bonds have acted as a pretty good hedge and offset. I'm not sure you thought that would be the case. Is this a head fake? No, I think bonds looked attractive at those levels relative to stocks. And that's largely what played out, in part because the growth expectations were so extraordinarily high. If we look at what's going on in the bond market today, we've mostly just reversed what was a relatively extraordinary pricing of forward nominal growth that occurred in September. And so we're back to levels that are, you know, a couple months ago. If you look over the course of the year, we're still up, you know, depending on which tenor you're looking at, somewhere between 60, 80, 100 basis points.

41:33And there's still a fair amount of tightening priced into the market as well on the short end. And so I think part of the dynamic related to bonds is as growth becomes more of a question in the market, we're likely to see a lot of that tightening expectation, that sort of high nominal growth pricing on the long end start to back out. And bonds are likely to be certainly a safer asset than stocks in this sort of environment. Bob, great to get your take as always. Thank you. Bob Elliott. it. Up next, we'll discuss how investors are feeling about Anthropics upcoming and potentially historic IPO after this dismal week for tech stocks.

42:10Plus, Elon Musk once called it Tesla's best product ever. But now the Cybertruck is getting scrapped. Details in closing bell overtime returns. Elon Musk announced on X this morning that Tesla will wind down Cybertruck production at its Texas Gigafactory around the middle of next year. Musk said the company wants to make room for increased production of its CyberCab RoboTaxi. The truck made a memorable debut in 2019 when an onstage demo went wrong as glass that was supposed to be breakproof shattered when one of the designers threw a metal ball at it. Should probably test that first. After the debut, the truck spent another four years in development before going on sale.

42:45The car was plagued with a slew of recalls, manufacturing issues, a lot of complaints about rusty spots, et cetera. So not exactly an easy product launch. Some embarrassing videos of it being towed by like a Ford F-150 when it got stocked. And I think they've sold like only 70 ,000 total units cumulatively. So who knows, maybe they'll become, you know, rare collector's items and hold their value. And a bunch of them were sold to SpaceX. That's true. That's right. Very much on the balance sheet of SpaceX right now. Well, Anthropik's highly anticipated IPO is expected in less than two weeks. But concerns about the recent tech sell-off could change expectations for that debut.

43:20Kate Rooney has the details. Hi, Kate. Hey, Mike. So that's what we're hearing. Well, this tech rebound, though, this week, at the end of the week, is a sigh of relief for a lot of the investors and executives for Anthropic. A lot of the volatility, though, we've talked about, it's not great news for their upcoming IPO. I have been talking to investors that had really come to expect this$1.5 trillion number in terms of the valuation. Some are now telling me that's a stretch, given the unraveling this week of the AI trade. Investors are now preparing for between a$1 and$1.25 trillion price tag.

43:54it could put that below SpaceX's June listing in terms of the biggest ever. Some of these people, it's the same group that talked about$2 trillion before this tech re-rating we've seen and when the company first filed this summer. The biggest thing investors now want to see is that this company can get above the last private valuation, which was just under a trillion dollars. So that is a key watermark. Anthropic will be the first pure play AI lab as well. So it's a major test of investor appetite for this new asset class. They are going to be asking institutional investors who did just get burned, many of them, by the AI trade this week to buy into this deal.

44:29No delay yet, though. We are hearing that it's still on track. And guys, part of the tech weakness has, of course, been about the midterms, the risk of a slower AI build out as Democrats take the House and Senate. Here's what OpenAI's CFO, Sarah Fryer, told Sarah Eisen about it earlier. Well, first of all, you have to go meet communities where they are. You have to listen, learn. You have to set a plan and then be accountable. So when we go into communities, what do we hear? First of all, there's concerns about things like electricity. And we, OpenAI, have promised we will never raise your electricity bill.

45:01Fryer also confirmed that the company is raising right now in private markets at a$1.25 trillion price tag. That's before the new cash injection. But they're actively looking in private markets, guys. I would think that that would help Anthropic keep above that$1 trillion mark, or even 1.25, seeing that OpenAI is going for 1.25? It could be motivation. I mean, these two are quite competitive. If you remember, the Anthropic founders actually spun out of OpenAI. So maybe motivation to get above a certain price. The big implication is that if there were a reason that Anthropic had to pull their IPO, what I'm hearing after the OpenAI fundraise is there's a feeling that private markets are getting tapped out, that there's a lot of exposure to both of these names.

45:46And so if anything, it may add more pressure for them to get out to say, your biggest rival is out there raising tens of billions of dollars. It's not clear that that amount of capital would be available if last minute Anthropic decided not to do it. Again, as I mentioned, they are still on track, but private markets can only get you so far. They really need to tap debt markets, which is one of the motivations to get out here. Kate, thanks. Kate Rooney. Let's get you set up with next week's trade. App trade. trade. What's on the earnings calendar? On the earnings calendar, we got a mysterious word in there.

46:16Sorry. We'll get Skydance, Take-Two Interactive, and Hims and Hers on Monday, CarWeave and Subhub on Tuesday. Cisco, Applied Materials, Cerebrus, Nebius are the big names on Thursday. That should be interesting. And on the economic front, we'll get the October Consumer Price Index on Tuesday, existing home sales on Thursday, and the October Producer Price Index on Friday. So we're winding down, but we do have some critical ones when it comes to whether or not this rally can actually hold. For sure, yeah. All those AI hardware plays as well. And we're also in that zone where I always say the market is also just sort of reacting to itself.

46:50The fact that we've had this six-month reset. You have some oversold conditions. We'll see what the weekend and Monday brings. Have a good one. That does it for overtime. Fast money starts right after this. Snoring, gasping for air during sleep, daytime sleepiness. I'm Shaquille O 'Neal, and this shouldn't be anybody's experience. Ask your doctor about ZepBound towards Epitone, The first and only FDA approved prescription medicine for moderate to severe obstructive sleep apnea in adults with obesity. ZepBound is a prescription medicine used with a reduced calorie diet and increased physical activity to help adults with moderate to severe obstructive sleep apnea, OSA, and obesity to improve their OSA.

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