Closing Bell Overtime: Markets Search for Opportunity After a Wild Week 10/23/26

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1:00Craig Moffett: The bell's bringing an end to the trading day at the NYSE. The Rainbow Push Wall Street Project bringing the bell and closing out the week at the Nasdaq is Everly Global. Welcome to Closing Bell Overtime. You're live from Studio B at the Nasdaq Market Site. I'm Melissa Lee, along with Mike Santoli. Sox adding to yesterday's losses, but tech holding up a little bit better today. The Dow losing 650 points. S &P 500 down about a half a percent. Nasdaq Composite a little bit lower here.

1:23Brad Conger: The weekly numbers show pretty much a flat performance, but the Russell 2000 was up about 2 % on the week. Bond yields bouncing back today, the 10-year right at the 5 % level. Oil prices also moving up, highest levels in about six months.

1:39Craig Moffett: As a result, energy by far the best performing sector today. Tech and real estate, the only other groups finishing in the green. The two worst sectors, the consumer groups, another byproduct of higher oil prices. We'll discuss that and we'll get you set up for a very busy week ahead with a flood of earnings plus a Fed meeting. But let's start off with the first take on the close. And we did try to push higher earlier in the morning. We just sort of flopped into the close with very little conviction.

2:03Brad Conger: Yeah, there's not really an assertive bargain hunting impulse, even though you can start to make the case things are falling in line in terms of a rolling correction. You've reset positioning. Industrials really weak today. They're like 12 percent off their high. anything that touches AI, very weak. It doesn't seem like earnings estimates are coming down, but you're not seeing the buying response there. So cyclicals on the downside. I do think there are enough excuses not to act very soon with the Fed meeting and the meet of earnings season and obviously the election and whatever might happen in Iran.

2:36Brad Conger: So all that being said, you think that if this is a normal corrective process, we're working our way through it pretty well. But the market behavior itself is so defensive that it's tough. And the one other piece is that retail, by a lot of measures, has not stopped buying the dip. And when we had bottoms at the end of March and the end of July, retail was net selling because they finally capitulated. So that's a little bit of an ambiguous setup.

3:00Craig Moffett: Yeah, I think that what is interesting going into next week, especially with the big earnings on tap, Amazon, Microsoft, Intel, etc., is sort of the rethink that we got in Meta's earnings. We were here when the news crossed the wires and everything looked fine. Analysts were on saying it looked like a strong quarter, news is great, blah, blah. The next day you get the filing out You see how they talk about CapEx and they see about how they talk about constraints for capital and sort of this rush to to fund a data center built out here. And you get this rethink. And I think there could be a lot of skepticism going into a lot of these other big earnings reports at first blush.

3:34Craig Moffett: It may look good. We have to see what they actually say.

3:36Brad Conger: Absolutely. This idea that not just is capital constrained, but you have to be kind of aggressive and indiscriminate in raising and spending it. And whether that's true or not for everybody, I think maybe we'll get some color on that. But it did seem to knock down the stock. I also don't think it's great when a founder CEO is kind of revealed to be kind of extorting his own board to create a new share class and pay his taxes. But nonetheless, I do think that's the that's really the overlay. And people are realizing how overexposed they were to the hardware trade, you know, four or five months ago.

4:07Brad Conger: And they're they're hesitant to get back in. So there was some strength, however, in the chip names today as some of the major laggards tried to claw their way back out of this week's slump. But the sector still closed down about 2 percent. So are there opportunities to buy some of these tech names at a discount? And if so, maybe which ones? Joining us now is John Belton, Portfolio Manager at Gabelli Funds. John, good to see you. Good to see you, too. So just talk about that, how you would essentially go shopping in this environment or maybe test some of your bull thesis on what you already own.

4:39Adam Crisafulli: Yeah, it was a tough week. I think the meta print is kind of a really interesting example of how this market is thinking right now. You know, the meta sold off on basically that 14C, which revealed potential plans to raise hundreds of billions of dollars of capital over several years. Right. In isolation, that's actually great for the AI infrastructure supply chain. That's great for semis companies. That's great for the data center industrials. That's great for power management providers, all that. But yet this space took a nosedive. So I think we're in this tough market environment right now.

5:15Adam Crisafulli: Sentiment's very negative. And I think what the market's telling you is we need more proof that there's AI monetization happening outside of this supply chain. And so that's kind of what I'm thinking through. Where are the sources of modernization? Where are the future sources of modernization? When are those coming online? When can we get more answers on that front?

5:36Craig Moffett: So when you hear about that spend, do you think that it is evidence that there will be that spend? And so therefore the likes of a GE Vernova or, you know, the suppliers of the picks and shovels will benefit? Or do you question it also?

5:49Adam Crisafulli: Well, I think clearly those companies, the fundamentals are benefiting this year, next year, probably for the next several years. I guess the question is there's now a debate about the quality of those revenues. If all of that revenue is flowing through and it's just coming from, you know, this build out that's not going to ultimately monetize, then that's a problem. Then that's fundamentals can work higher, but stocks can keep derating. And that's what's been happening. Personally, I do feel like the monetization story is alive and well. I think there are clear commercial use cases for AI that are playing out today.

6:24Adam Crisafulli: One of the big ones is digital advertising. Meta showed that as well, accelerating that ad business pretty significantly at the scale they're at, thanks to AI. I think that's an underappreciated part of this. And I think there's other areas, too, where I'm feeling optimistic about the next few years.

6:41Brad Conger: There's a line of thinking that we're going to hear from some of the hyperscalers very soon, next week, that the cloud services business, almost however this all plays out, they're in a good spot, right? to be kind of these bundlers and deliverers of AI services one way or the other. Obviously, they're big spenders as well, but they can be, I don't know, perhaps they can kind of take their time and pick their spots and they have the resources to spend more. So maybe that's the test next week when we see how the market reacts to those numbers.

7:10Adam Crisafulli: I think these businesses are very well positioned. I think you made a good point there. I also think all these companies, they are monetizing this infrastructure in their core business. I mentioned Meta and Google on the digital advertising front. Amazon on the e-commerce front, Microsoft on the software front, what they're doing with Copilot. These are companies where they are AI beneficiaries in their core business. And yes, they are leasing some capacity as another business that at least creates a near-term monetization channel. I would also say just the core cloud businesses, not the generative AI leasing, but the core cloud businesses, That's been accelerating for several quarters, too, as customers leverage IT in the cloud to do smarter things with their data, which is also made possible from AI.

7:56Craig Moffett: You mentioned proof of monetization when it comes to these hyperscalers seeing it in their own business. But we really need proof of monetization outside of this AI trade, right? And we needed to see it in financials and industrials and every other part of the economy in order to make that spend look like it is worth it. But do you think we are getting that evidence yet?

8:17Adam Crisafulli: Well, we're definitely getting it digital advertising. And I know that these companies, they're technically in the AI infrastructure value chain, but they're monetizing outside of that value chain, if that makes sense. They're monetizing in their digital advertising businesses. I do think we're getting, and then labs are another area where, you know, yes, Anthropic looks like they slowed down in the third quarter. It doesn't change the fact that combined OpenAI and Anthropic probably get a six or seven X revenue this year to a pretty massive scale. So that's very encouraging. I think you're starting to hear of some other areas as well.

8:51Adam Crisafulli: Autonomous driving, very clear. I think, you know, in healthcare, there's a lot of excitement right now about drug discovery and the use of AI and some of the DNA sequencing data to train AI models and fueling those programs. So I think you're getting bits and pieces, but it's still early in a lot of these newer initiatives. All right.

9:13Craig Moffett: John, great to see you. Thank you. Thank you. Energy market in the spotlight today as crude crosses back above$100 a barrel. As tensions swell in the Middle East, Pippa Stevens is here with the very latest. Hi, Pippa.

9:24Mark Headley: Hi. So we saw Brent rise above 117 today at the highs of the day, and that is the highs going back to the end of April. And it also is now just$10 away from the post-war high of 126. And what's really interesting is we have seen Brent kind of creep higher alongside flows recovering out of the Middle East. They've both been rising together. And so it's, you know, the question is, well, why? And so part of that is potentially some portfolio hedging against energy inflation. But then there's also the kind of opaque geopolitical risk premium that's now being priced in. And as fears in the market grow that we could see an escalation, refiners are now paying up for those barrels today.

9:56Mark Headley: That's, of course, why we're seeing the backward-dated structure. But it is interesting in that back in April when we're seeing new highs on Brent, the curve was a lot steeper. So back then it was still very much going to be temporary. And now we are still seeing the backward-dation, of course, but it's a lot shallower. And so, you know, that kind of gives a sense that, OK, maybe this is going to be longer term than we thought. But what everyone is talking about today is this ship departing from Primors, Russia, carrying Russian diesel. This would be the first cargo to hit the U.S. in more than three years.

10:21Mark Headley: It's carrying about 40 ,000 metric tons of diesel. So that's about 300 ,000 barrels. To put that in perspective, our daily demand is 4 million barrels per day. So this is about seven and a half percent of one day of demand. Our exports are about 1.5 million barrels per day. Now, interestingly, it was initially signaling arrival in New York on November 7th. That has since been updated to for order, which means that it's an unknown destination at this point. So we will be tracking that one carefully. But initially it said New York and now it's a little bit of TBD.

10:49Brad Conger: You mentioned that, you know, there's now more crude exiting the Gulf. I guess one explanation for why it's also been met with higher prices is the cost surrounding getting it out, but also this perhaps not quite fully known restocking situation that's going on wherever in the world.

11:08Mark Headley: Yeah, so restocking is definitely looking forward. That's going to be something that has to happen because with the SPR release, it was a swap. And so it has to be filled at 120 percent. But what we're also seeing is that, you know, the transportation costs are now at record. So in some cases, it's$45 per barrel. It used to be$2 per barrel before the war. And so to what extent are also now producers lowering their costs so that they can help to offset some of the transport costs for the refiners? And what's really interesting in the oil market is that we are now seeing about a$60 difference in terms of different grades of crude based on where they're located and based on where they're going.

11:40Mark Headley: And so now we're seeing kind of the geopolitical shift to you want to secure the barrel that's closest to you. And so all of this is just, you know, while flows out of the region have recovered, it's upending how all of these trade dynamics have evolved over time because it's just so much more expensive now. So you're looking elsewhere.

11:56Brad Conger: Interesting. Thanks. Well, we'll say stay on diesel for a bit. Discount retailers moving lower after Wells Fargo warned that rising diesel prices could put pressure on the profits in the second half of this year and 2027. Analysts there estimate the average operating margin drag could climb to 27, climb 27 basis points in the third quarter with the earnings per share drag doubling. Dollar Tree appears the most exposed, according to the analysts, estimating a$32 million freight-related hit in the fourth quarter. So Dollar Tree, also Dollar General to a slightly lesser degree. And the supermarket chains were right in the middle of it.

12:33Craig Moffett: Yeah, I mean, Walmart, we already heard from Walmart's management saying that if diesel prices stay where they are, that's going to be 50 to 100 basis points of additional inflation in 2027. So we know they have quantified the impact. S &P Global also had a very interesting report about the food shock that is still to come in terms of the impact of diesel prices on farmers. Of course, they use it for their tractors. But also one interesting segment was biofuels and how now the higher price of oil making biofuels more attractive. And so that is competition within the food chain to provide those crops for biofuel instead of food.

13:06Craig Moffett: So that's another sort of dynamic. And they said, you know, in 2027, that's when we could actually see this food shock bear out.

13:12Brad Conger: Interesting. And yes, feeding into food inflation. And also, I guess the dollar stores are the ones with the least pricing power. So they get the hit. Exactly, thinnest margins.

13:20Craig Moffett: Let's get to shares of Maple Bear, owner of Instacart, jumping in the final few minutes of trade and closing 9 % higher on reports a company is in talks to sell itself. According to the information, the company has had preliminary conversations with DoorDash and Uber in 2021. Instacart initiated talks with DoorDash about a possible merger or sale at a value of$40 to$50 billion. The company is currently valued at$12 billion. You see the stock there trading at$56.44. Coming up, some startling statistics on the recent slide for Chinese tech stocks and the reason for Alibaba's latest move lower. Plus, cybersecurity stocks soar in the latest potential threat why one CEO does not think it's going to get better anytime soon.

14:01Craig Moffett: We'll be right back.

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15:56Craig Moffett: Take a look there. Exegy ringing the closing bell at CBO in Chicago, which will end the regular trading day for options for the day and for the week.

16:05Brad Conger: We've got an update on the tariff war with Canada. Eamon Jabbers has the details. Eamon.

16:10Adam Crisafulli: Yeah, Mike, that's right. Wanted to update you on this because earlier we brought you this story from Senator Susan Collins, who had a press release out about some exemptions to tariffs that she'd won from the administration that might help Maine voters. Obviously, she's in a very tight race for reelection and tariffs have been a crucial element of the campaign in Maine. The senator cited exemptions on nine categories of products. So what we've now gotten is an update from the U.S. Trade Representative's office, the actual details of this tariff. And it's not as clear a picture as we might have thought earlier in the day because they're swapping out tariffs that are being exempted with other new tariffs that are being imposed.

16:52Adam Crisafulli: And so it looks like maybe a roughly even swap, although it's difficult to say from the information we have here. So no longer tariffed under this plan. Plywood sheets, paper pulp products, agricultural machinery. But now being tariffed, cocoa powders, paints and varnishes, carpeting, window air conditioners, archery equipment even being tariffed up there in Maine. So all in all, this might be a win for Senator Collins, and it might suggest to Maine voters that she has won these exemptions. But clearly what USTR is doing is just swapping around which products are being tariffed here, as we're just about a week plus out from Election Day, guys.

17:32Adam Crisafulli: Back over to you.

17:33Craig Moffett: Eamon, thanks. Eamon Javers. While concerns about AI spending hit tech stocks in the U.S., Chinese tech stocks also getting slammed. The K-Web ETF falling to its lowest level since January 2024. It's now down 44 percent from its most recent high earlier this year. Alibaba, for one, down 8 percent this week after regulators met with the company and other e-commerce sites about product quality. The regulator issued similar guidance last year but says it still sees quality and safety concerns in live streaming e-commerce and quick retail. And the fear, of course, is that there's going to be increased regulatory oversight on Alibaba as well as others.

18:08Craig Moffett: But, you know, Alibaba has been in the crosshairs of Chinese regulators before to the point where its founder, Jack Ma, sort of disappeared for a while. So we don't really know the extent to, you know, how hard the hammer is going to fall on Alibaba. Oh, for sure.

18:24Brad Conger: There's been this sense, this shadow over Alibaba pretty much since it was public that it wasn't going to be fully allowed to exploit all the advantages of the business and to really reap profits. 10 years, almost exactly flat, almost exactly dead money for Alibaba, which is remarkable considering, you know, everything that's gone on in tech since then. Well, cybersecurity stocks soaring today on continued worries about a new vulnerability called PHP 2-Shell discovered by AI. CrowdStrike CEO George Kurtz saying AI attacks are doubling every month, and he says this PHP issue won't be easy to fix.

19:01Adam Crisafulli: What's most problematic and one of the areas I think people are not talking enough about is all the old internet appliances, the routers and the firewalls and these old internet devices that actually use old versions of PHP that will never be patched. There's going to be a long tail of these vulnerabilities, and you're going to see a lot of breaches happening in the coming months from this.

19:21Brad Conger: He added that we're seeing many different adversary groups with very low skills now able to conduct nation state level attacks for the cost of tokens. And this whole idea of, you know, sort of older, this sounds like Y2K to me, where it's kind of like, OK, not that it's not going to bear out, but that it's one of these things where it's just kind of like, look, we just can't fix it in time to get it done. But the idea that, you know, AI continues to expose greater areas of the Internet to these to these attacks is is sort of scary. And it's hard to calculate how that's feeding into the negativity on the AI trade in general, which seems like it's more risk than reward.

20:01Craig Moffett: Yeah, I mean, we hear about all these agents going rogue, getting out of the sandbox and attacking things that are fairly contemporary. But when you're talking about PHP, I mean, this is something that's been around for more than a decade. And so imagine all these agents now prowling around, trying to find vulnerabilities in systems that have existed for decades at this point. So you're dredging up all of the vulnerabilities from before plus the new ones. And no wonder why the cybersecurity ETF is doing so well.

20:30Brad Conger: And wasn't there some story that it's a volunteer who kind of maintains the whole PHP? Like, in other words, kind of sends out patches and things like that. It's just not a centralized thing where companies are on top of this. It's pretty frightening.

20:43Craig Moffett: Well, the SpaceX threat once again hitting the wireless carriers but boosting shares of the tower companies. But how real is that threat to AT &T, Verizon, and T-Mobile? That is coming up next on Closing Bell Overtime.

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22:42Craig Moffett: The SpaceX effect is rattling communication stocks. AT &T and T-Mobile among the worst performers in the S &P 500 today. T-Mobile hitting a nearly three-year low. On the flip side, Crown Castle is the S &P 500's biggest gainer on the session. That extends a trend we've seen over the past two weeks since SpaceX acquired a large block of low-band spectrum. The latest catalyst, the company reportedly aiming to secure 80 ,000 sell sites across the United States. Can it pull it off? What kind of threat is it to the telecom carriers? Joining us now, Craig Moffitt, senior research analyst at Moffitt-Nathanson.

23:13Craig Moffett: Craig, great to see you.

23:15John Belton: Good to see you, Melissa.

23:16Craig Moffett: The sell-off in the telecom stocks, is that overblown in your view?

23:20John Belton: Well, it is if you're basing the sell-off on the threat to earnings. things. The problem is this is more of a narrative threat than a financial threat. And so it's really hard for, I think, everyone. Investors are trying to figure out what do we do with this? Because it could take years for SpaceX to actually do anything that mounts a threat, if at all. But does that mean that you're going to have this overhang for years? It's, I think, a complicated question, because again, I don't know that it poses all that much of an earnings threat. But who knows about when the kind of narrative overhang lifts?

24:03Yeah.

24:03Brad Conger: So you make the point that, you know, this is a competitive business already. It's mature. It's not great returns on capital necessarily. But if you had another aggressive, maybe irrational competitor in there for whatever reason, it doesn't get any better down the road. Is there any sense that you can sort of explain why SpaceX would do this in this way, if the reports are correct? Does it help out in terms of, you know, amortizing the cost of the Starlink network or any other way, bigger picture? Yeah, Mike, it's a really interesting question, right?

24:36John Belton: Because we'd said you can't do this well with satellites. So if you're going to try to compete, you have to build a terrestrial network. Well, that's now what it sounds like they're going to do. But it does beg the question, why? What's the appeal of the network? If you can't offload a lot of traffic from the terrestrial network onto satellites, your cost structure is not really going to be any different than a terrestrial network's. And by the way, once you've built the terrestrial network, there's no advantage to offloading traffic onto satellites anymore. So I admit, I'm sort of scratching my head, not just about the threat to the telcos, but in my coverage of SpaceX.

25:19John Belton: I'm trying to figure out what is it that makes you want to be in this business as the fourth player, because it's just not clear that there's an attractive return here.

25:29Craig Moffett: I mean, they would have to spend tens of maybe hundreds of billions of dollars in order to to do this, to go this route, Craig. And so I'm wondering, I mean, in your view, is is it possible if they if they for some reason wanted to do this, could they buy a carrier?

25:46John Belton: Well, they could. We spoke to them just a couple of days ago, and they reminded us that in public commentary that they don't see that as being attractive in any way. They talked about the extreme culture difference, and they're not wrong, Right. The telco culture of kind of slow moving bureaucracy inside of SpaceX would be would be a pretty bad match. So and you'd have regulatory issues and all that sort of thing. So I don't think it's realistic that they buy one. And even the strategic logic, why would you buy a business like Verizon or T-Mobile or something like that in order to wreck the business that they're in?

26:29John Belton: You know, it doesn't make any sense. So so, no, I don't think there's an acquisition play. But then you just have to wonder, is it is there some vision that they have that's different than providing service to cell phones and and houses and things? Is it that they want to connect robots and cars and things like that in the future? All of which, by the way, is fine. Again, it leaves you questioning. But why do you have to do it yourself? I know they like vertical integration, but what is the advantage of actually having your own network?

27:04Brad Conger: So does any of this admitted admitting that, you know, we don't know these answers, does it prompt any investment action? Just given how much, you know, the tower stocks have flown and the wireless carriers have taken a hit?

27:17John Belton: Well, my colleague Nick Del Deo, who covers the towers, would say that just the reaction last time suggested a pretty big tower build. This time they've said they're going to do a big tower build. It's not clear who they do it with. But but if they actually follow through, there's there's real revenue for the towers and it's very high marginal contribution. The towers are already there. So it's another tenant on leased space for the for the telcos. You know, it's not only years and years before you can build a network. It's it's years and years before. Then you have to start scaling the customer base.

27:57John Belton: That probably means huge subsidies of handsets and things like that, just like the carriers do, which means your cash flow negative for a long time during that startup phase. So it takes a long time before this business turns around and starts to generate any returns for SpaceX. For the carriers, the one thing you do have to worry about that's sort of approximate risk is even if they don't successfully build a network, if they start bidding for spectrum, that could really bid up the price of spectrum. There's a spectrum auction due next year called the Upper C-Band Spectrum Auction. And if that happens and there's another bidder, you could see much higher prices.

28:40John Belton: It doesn't generate any extra revenues if you have to pay more for the spectrum. So that's just unequivocally bad news for the carriers if the price of spectrum goes up.

28:51Brad Conger: Right. So I guess an overhang either way. We'll see how the market digests it all as we go along. Craig, thanks very much. Appreciate the time. My pleasure, Mike. Time for a CNBC News update with Frank Holland. Hi, Frank. Good afternoon, Mike.

29:04Adam Crisafulli: Israel ordered a full lockdown of the occupied West Bank today after its military said two soldiers were killed in an attack by a Palestinian gunman who were also killed. Soldiers were ordered to go house to house in the areas where the attackers were believed to be from, and Israeli bulldozers were seen demolishing at least one Palestinian building. 16 years after the Deepwater Horizon oil spill occurred off the coast of Louisiana, rig owner BP in the state of Louisiana agreed today to resolve their long-running disputes, including a$350 million payment to the state, along with a settlement of the remaining coastal zone lawsuits involving the company.

29:39Adam Crisafulli: It was the largest marine oil spill in American history. And Knicks owner MSG Sports apologizing today after employees were sent emails promising free championship rings only to discover it was a cybersecurity test. Those who clicked the link, they did not get rings, but instead were required to take security training. The team called that an unfortunate mistake and now says it will give rings and other jewelry to more than 275 members of the organization. Mike.

30:08Brad Conger: Wow, Frank. At least they're going to make good on it. I wonder if they'll be the real ones, this enormous... With a little pop-up that looks like MSG. Yeah, the whole thing. They might have to to make up for this one. I don't know. Yeah, right. All right, Frank, thank you. Thank you. Markets may not be expecting a rate hike next week, but will Chairman Warr signal anything about December? Plus, it's a huge week of earnings with Microsoft, Google and Amazon in big tech and Coke, Merck, Caterpillar, among a host of others. We'll discuss the setup for a big market week next on Overtime.

30:44Craig Moffett: Welcome back to Closing Bell Overtime, live from the Nasdaq market site. Stocks mostly lower Today, the Dow losing 650 points. S &P 500 down half a percent. Nasdaq Composite and Nasdaq 100 both flat after big losses yesterday. Oil up about 4%, getting back above$100 a barrel. Near levels we haven't seen since April on the latest aggressive talk from Iran and attacks from the Houthis in Saudi Arabia. Energy was the top-performing group on those oil price increases. Consumer groups were also bad as oil prices dragged on retail names.

31:14Brad Conger: Well, the Nasdaq 100 second straight week of declines comes as investors reassess some of this year's major winners in the AI trade, with stocks like CoreWeave, SanDisk, and Intel all down big in October. But next week brings another key round of data points when we hear from hyperscalers Microsoft, Alphabet, and Amazon. In fact, it is the busiest week of earnings, with one-third of the S &P 500 reporting. Joining us now is Vital Knowledge President Adam Crissifuli and Hurdle and Company CIO Brad Conger. Welcome to you both. Adam, I'm hoping you can help boil down what we've been seeing this week, because it's not a simple linear story.

31:50Brad Conger: You have treasury yields falling pretty appreciably, credit spreads widening out, yield curve flattening, the anti-AI stocks working, and the AI stocks dragging on the S &P 500 to test these summertime ranges. So what do we want to see next week? You know, I think one of the most disconcerting parts about the tech slump over the last couple of weeks is that earnings from the group, at least the Q3 numbers and the Q4 guidance, which is really all they're providing, were bullish. All the numbers came in with expectations. Management teams are very positive. There's been no deterioration in kind of their qualitative messaging.

32:24Brad Conger: You know, I think what's really happening, this has been an ongoing process over the last several weeks. It's really intensifying, is you're seeing, you know, I think a lot of indigestion in capital markets when it comes to taking down all the equity and credit paper from this sector. And if the capital door is slamming shut, then there are real implications for the pool of funding that is underwriting all this capex for the group. And that's really what people are reassessing for 2027, not so much the Q3 or Q4.

32:52Craig Moffett: What's your take, Brad, in terms of whether or not it is indigestion, as Adam had mentioned, or if the door is being shut? Because that makes a big difference in terms of whether or not you want to participate in the AI trade.

33:02Adam Crisafulli: So I think there are some new information. DeepSeek released its open source infrastructure code called DeepInfer. And the upshot of that was that delivering tokens is a 95 % margin business. And I think that shocked the market because it means that the business models of the API links like OpenAI and Anthropic are much more challenged than we thought. Meaning when you have a gross margin of 95 % and no differentiation, what happens is price war to the marginal cost.

33:46Craig Moffett: Right. To the advantage of the Chinese player or the open source player. Exactly.

33:50Brad Conger: And what would you be doing in light of that? In other words, you know, I keep saying we go back to May or June. And if you thought that the AI build out was the biggest story in capitalism at the moment, guess what? The S &P already got 19 percent weighting in it and you didn't have to buy any more. And now there's a lot. The stocks are a lot cheaper on paper. And nobody is saying that the demand is slowing down in the out year. So what do you do as an investor with all that?

34:17Adam Crisafulli: That's right. Right. The interesting thing about the sell off in these neoclouds is the market. And in contrast to what Elon said about how they are monetizing compute at 50 million a megawatt, which is insane, is the market is telling you, yes, compute's tight right now. Demand is exceptional. But we're worried about five year contract pricing. And so I think maybe the market gets settled as people announce more contracts at the long end that are profitable.

34:54Craig Moffett: So then how do we sort of filter that down? Because what we saw also is this, I mean, semiconductors continue weaker. They're off more than 20 percent from their June highs at this point. I mean, how do you sort of filter that down to the picks and shovel trade that had benefited from this notion that this data center buildout will continue?

35:11Brad Conger: I mean, I think the biggest catalyst really is not going to be earnings. It's going to be this Anthropic S1. You know, if they do plan on coming before Thanksgiving, it needs to kind of arrive by Monday, Tuesday, Wednesday of next week. And then, you know, really how that issue gets absorbed by the market. What's the valuation? Does it trade well afterwards? That, I think, is really what people want to know most about, not earnings. Like I said, the earnings have been fine. Management teams are still very bullish. It's more the capital availability and the market's appetite for the paper from these companies.

35:39Brad Conger: And if Anthropic does well, if it comes out at a one and a half trillion plus valuation and trades well beyond that, that would be, you know, it would be a big shot in the arm for the industry. And so that to me is really next week, you know, is a lot on the calendar. It's a very busy week. That is the number one event by far. Brad, you've obviously gone like layers deep in terms of a lot of the dynamics that are driving the story. But I wonder if I'm just taking a snapshot of the market behavior recently. And I say, look, consumer cyclicals, industrials, transportation, banks, all incorrections, all 10 plus percent off their highs.

36:14Brad Conger: This has been a routine midterm election, you know, lull in risk. If an interest condition is tightening a little bit, we're going to get through the Fed meeting next week and the election. And maybe that creates some kind of release to the upside.

36:27Adam Crisafulli: Is that plausible to you? Absolutely. It could be just a we're digesting valuations. Like you said, PEs have come in. Like Adam said, numbers have been excellent. So it could just be a little bit of a lull around the midterms. Maybe that's the trigger that releases the market's upside.

36:46Craig Moffett: Have you been seeing opportunities with these sort of rolling corrections sectors?

36:51Adam Crisafulli: So we have bought into some of the hyperscalers as they've derated. So, you know, when they were high 20s and low 30s P.E., we were underweight. Microsoft gets to a 20 forward multiple. We start to participate. And maybe the same for semiconductors now that they're in the single digits.

37:10Brad Conger: Just to counter what I was just saying, Adam, I mean, the uncomfortable piece is we have to be watching the credit dynamics for not just the neoclouds, but Oracle, which couldn't get out of its own way again this week. And so it's hard to escape this idea that you have this kind of pinch on financial conditions. We don't really know if the Fed is going to welcome that, is going to say, OK, now we don't have to do as much next week or, you know, kind of lean into it. No, it's really going to be interesting, I think, for the Fed on Wednesday afternoon to hear kind of the commentary around what's happening in AI.

37:45Brad Conger: They've been very vocal for months now that AI is inflationary, that AI is having a crowding out effect. And that's one of the factors driving up yields. You know, so they might just look at what's been happening as a normal, you know, normal correction that's totally healthy and nothing to worry about. You know, but if they, if a worse were to change its tone even a tiny bit at the margin, that certainly would send a powerful signal that, you know, perhaps they aren't going to be as aggressive with tightening as assumed. The market this week kind of, they had been pricing at 100 % odds of a December hike.

38:13Brad Conger: That kind of dropped a little bit below 100 % in the last couple of days, I think, in response to all the volatility.

38:18Craig Moffett: Adam, thank you. Brad, thanks. Appreciate it. Well, despite the volatility this week, the markets ended down less than a percent. Overseas markets, though, didn't fare as well. The emerging markets ETF off one and a half percent. Nikkei off more than four percent. France, two percent. So could global markets provide a better value right now? We'll dive into that.

38:44Craig Moffett: Investors continue to sell tech amid growing anxiety over massive AI spending booms. The S &P 500 is finishing the week in the red. And if you're thinking it's time to look for other opportunities outside the U.S., overseas markets are also facing headwinds. Japan's market is down 4 percent. The stock 600 off 1.4 percent. India off 2 percent. Emerging market ETF EEM off 1.4 percent. So do international markets provide an attractive entry point or is there too much risk abroad? Joining us now, Matthew's executive chairman and portfolio manager, Mark Headley. Mark, great to have you with us. It's just a pleasure.

39:16Craig Moffett: And you focus mainly on Asia, and the trade there has really been driven also by technology. I mean, it's been sort of the semiconductor trade, et cetera, and that's been hit very hard. Absolutely. So what is your interpretation of what is going on here? Because not only is there the fear about the lack of capital funding and AI build-out, but also there in particular is a threat of Chinese competition, which would mean much more to the South Korean players as opposed to the U.S. players.

39:41John Belton: Absolutely. I think that there's a few key elements. Number one, Asian markets and semiconductors in particular ran too hot, too fast. Everybody dove in. Massive local buying. They got clobbered. And so, you know, you go up 100 percent, you fall 50 percent. There's just some panic in the streets, Korea being prime example. The Korean semiconductors are also the ones that are not at that peak level. The upper level chip market is pretty safe and pretty solid. The commodity chip market, China, is coming. I think it's going to be a couple of years. And I think the semiconductors in Korea have pretty locked in profits going forward.

40:18John Belton: They are extremely cheap. It's going to be volatile. But honestly, I think this sell off went too far. I mean, I don't think that it's not like they're not making great money and it's not like they don't have great demand. But every time anybody hears that China is ramping up on something, they listen now and they didn't used to. But now it's like, oh, here comes China. So the footsteps are out there. I honestly think it's a 28-29 issue, but the markets spooked. This market spooked easily.

40:47Brad Conger: Given that the South Korean market has been such a swing factor in global markets, in our technology sector, and that Taiwan Semi, I mean, it's the largest holding in the EM benchmarks in many of your funds, do the overseas markets actually provide diversification to our exposure?

41:07John Belton: I mean, I started in 89 and, you know, I was there when the first semiconductor plant was built in China in 2001. You know, this used to be a nice niche area that was a commodity and you hit the cycles right. And we spent all of our time in consumption and financials and interesting domestic plays. Those companies are still there, but domestic earnings have generally been abysmal. So you've got to hope that with low valuation and a gradual recovery in domestic earnings, I'm actually really excited about financials across the emerging markets universe. I am really pushing our team to spend a lot of time looking at them.

41:45John Belton: I think individual plays like Ping An that, you know, have just been slaughtered this year. It's just capitulation selling in China. And honestly, you know, the Chinese domestic economy is really in the dumps. I think the government will try to help it, not dramatically. I don't expect a quick recovery.

42:03Craig Moffett: We've thought that for so many years now, I mean, that there is always this hope around the corner for some sort of stimulus package, and it has not come. What makes you think it's going to come now?

42:11John Belton: I don't think it's going to be about a stimulus package. I think it's about being about a property market that is five years into a major bear market. I mean, I try to remind people that in 2012, 13, after the Great Recession, people here still were terrified, scared of property, not bullish on anything in the U.S. And that was a wall of worry that the U.S. market has climbed for the last 14, 15 years. So I just think there are opportunities for improvement from a very low valuation basis. basis, it's not exciting. It's not thrilling. But little P.E. movement, little earnings growth and foreign investors and domestic investors are underway.

42:51Brad Conger: I was going to say that. Yeah. I mean, is there a way to say, you know, where that stands relative to past troughs in history?

42:57John Belton: I feel like I've gone back to early in my career where I'm having to explain the basics about international investing because U.S. investors are down to something like four or five percent in their portfolios. Now they get a lot of exposure from big U.S. companies, No doubt about it. But you need to go find diversification that isn't based on the semiconductor industry. And we have always specialized in smaller and midsize companies that have domestic earnings. So I love a company in the health care business and the insurance business that finds a domestic story, a domestic earnings base. And if you can buy that chiefly with a good dividend, it will be defensive over time and it has good growth prospects.

43:35John Belton: Mark, good to see you. Thank you.

43:37Brad Conger: Thanks. Well, Apple's warning of. Limited inventory for the iPhone duo didn't stop lines forming outside of some of its biggest stores across the country. We are live outside the flagship store when closing bell overtime comes back.

44:00Brad Conger: Cruise stocks hitting rough waters today after J.P. Morgan downgraded Norwegian to underweight from neutral and cutting its target by$2 to$11 a share, implying more than 20 percent downside. The analysts there citing rising financial risk as the company shifts its focus from premium adult travelers toward families. The firm is also concerned about increasing deployment of ships to the Caribbean.

44:23Craig Moffett: Well, Apple's iPhone duo has finally arrived at Apple stores worldwide. The company has warned of limited inventory, but that hasn't stopped people from lining up in hopes of getting their hands on the new phone. Mackenzie Sigalis has been on the ground at Apple's Fifth Avenue store tracking the demand. Hey, Mac.

44:39Mark Headley: Hey there, Mel. So last night I was talking to people online, and really there were two categories of folks. You had people who were just trying their luck, seeing if they could get a duo based off of walk-in inventory. And then you had people who actually had successfully bought a duo via presale but wanted an earlier date. They didn't want to wait until late January to get their hands on this device. And what I will say is that by 10 a.m. today, so two hours after the doors open, they were out of that walk-in inventory. Same story in Austin, which is where CEO John Ternus showed up to welcome customers into the store, to speak to employees there.

45:13Mark Headley: That's actually their second biggest corporate home base after Cupertino. But what I will say is that these are imperfect gauges of actual supply, right? That's what we're going to get in the next few days. On Monday, we're going to see the supply side notes. People will have been out to Apple stores around the world doing those supply chain checks, getting an imperfect but more complete sense of how many duos have been sold. And then a week after that, we hear from John Ternus during his first earnings call as CEO. And during the quarter that he'll be reporting on, only a couple weeks worth of iPhone 18 sales.

45:45Mark Headley: But what's going to be key is on the call. Once we get those numbers, he's going to very likely address guidance, as they usually do. And that will be for the December quarter. That is when those very tough comps against the iPhone 17 super cycle begin. When, remember, guys, in that December quarter,$85 billion just in the iPhone segment. That was up 23 percent from a year earlier.

46:06Craig Moffett: I'd be curious, Mac, to see also how many people were waiting, not buying an iPhone 18 and waiting to see the duo and then see if we see sort of a pickup in orders on the 18 as well.

46:20Mark Headley: Well, that's so last night was around 60 people. And then when I got back here, 445 a.m., the line had more than tripled. And then it kept growing up until that 8 a.m. start time of doors opening. And what I will say is that so many people describe this desire to have like a tactile interaction with the device because, I mean, a lot of these people were first timers getting in line, sleeping on the sidewalk in order to make sure that they could get their hands on a device. And they're so excited about the fact we're seeing this first physical major redesign of the phone in its nearly 20 year history.

46:52Mark Headley: And that excites people. And it's not just iPhone users. Frankly, I was talking to people who were Samsung users because they've been buying those foldable devices since 2019. Google Pro Fold users. But people wanted to see what the crease looked like. All the questions that you and I were talking about yesterday, these are the things that people wanted to come into the store for. Now, whether or not that halo effect exists, they'll buy an 18 Pro if they can't get their hands on a duo. That's something that hopefully we'll find out more about when earnings come out.

47:19Craig Moffett: All right, Mac, thanks. Mackenzie Sigalos, there will be an agent, an AI agent, to solve this problem.

47:25Brad Conger: Yeah, no doubt about it. You know, one of the lines about the new kind of form of the phone is maybe it's going to help people who are addicted to scrolling because it's not as conducive to the shape. I don't know if that's going to be a selling point or are people going to stay away from it. But it'd be interesting to see the numbers. That's going to do it for overtime this week.

47:42Craig Moffett: Fast Money starts right after this quick break.

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