Closing Bell Overtime: Tech’s Rally Comes Undone 10/22/26

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1:05The bell's ringing into the trading day at the NYSE AT &T. Ringing the bell and at the NASDAQ Future Wave Acquisition doing the honors. Welcome to Closing Bell Overtime. We're lost in studio via the NASDAQ Market Site. I'm Melissa Lee along with Mike Santoli. A big tech sell-off today. The NASDAQ down 2.5%. That's its worst day since June. S &P 500 down a little bit more than 1%. The Dow basically flat, but a few points in the green here. Concerns about spending dragging on Meta, which was actually up big right after the results last night. NVIDIA's Jensen Wang also adding to the spending concerns.

1:35Much more on both those stories coming up. And also take a look at Apple continuing to trade as the safety mega cap. And speaking of safety, a big rotation into defensive groups today. Procter & Gamble up 5 % leading the Dow. We also saw a big drop in bond yields, the 10-year falling below 5 % for the first time in a month, closing at 497. And we are waiting for earnings from two stocks in the middle of the AI trade, Western Digital, Bloom Energy. Both were down big today, but still up more than 100 % this year. We'll bring you the numbers as soon as they cross. But in the meantime, let's start off with the first take on the close.

2:10We got this big sell-off, really concentrated in semiconductors. We saw very heavy volume on the SMH in terms of number shares traded. And also the destruction there is really noticeable. It absolutely is. You know, last Thursday and Friday, we were talking about how there was this urgent, forceful selling in the hardware groups. It seemed like maybe it was forced on some level that you had these crowded positions that were getting purged. And it feels like a rerun of that, to be honest. It seems like there was still enough kind of lazy money looking for a bounce in there. And it didn't seem like there was that much new.

2:40It's really just testing the patience of the market as the credit market kind of shuts itself off to some of the marginal borrowers like Corweave. And it cascades through the food chain. But a caricature of that binary market we've gotten used to now. Oh, totally. I mean, we're sort of, OK, we're concerned about A.I. Harbour. So we're paying up 4 percent for Colgate-Palmolive today, right? So it's trying to protect itself with this rotation, but it's almost, you know, kind of too aggressive and too desperate in a way to really keep the indexes comfortable. I mean, what is that safety trade if you're paying up for a Walmart, for instance, at these valuations or an Apple, which we highlighted at these valuations?

3:19So that's where we are in this trade. And, of course, we can't get it with not talking about Corweave right at the top. I mean, really, a new low here on Corweave just can't get out of its own way. And we highlighted the bad action yesterday in the past couple of sessions. And here we are again, ground zero, despite Jensen Huang really trying to defend the stock. Nothing can do anything to lift Coral Weev off. No, if you're a consumer of capital at high cost, then the market doesn't want you right now. I think the real debate is whether, in fact, you can just sort of slice off that part of the ecosystem and the rest of it's OK.

3:49And maybe we slow down and maybe it's a little bit more disciplined. It's hard to say. But one thing that was fascinating is all these correlations are also getting scrambled because bond yields down, stock indexes down. Bond yields are now kind of a little bit of a metric on AI CapEx overheat potentially. And that shows you that we've sort of lost that interplay today. Well, we'll get more on two big mega caps leading today's tech sell-off. Seema Modi watching NVIDIA. Julia Borst in tracking the big turn lower in Metashare. So, Seema, let's start with you. Well, as you guys were just discussing, the market wants to know if CoreWeave will need to lean on NVIDIA for financing should its unsecured debt continue to trade in distressed territory.

4:29When asked about CoreWeave, NVIDIA CEO Jensen Wang made it clear there is a capital bottleneck, not a demand bottleneck. The demand for the neoclouds is off the charts. Their capabilities are extraordinary. And so what is missing in the middle is the working capital to fuel that growth, to fund that growth. And because there's just so much demand across so many sectors of AI, there's a scarcity of capital. The demand of the capital is much greater than the availability of the capital. That's going to get solved. Follows comments made by Blackstone President John Gray this morning, who acknowledged there is a capital crunch, but also complimented Corweave executives, calling them very talented, adding that its underlying business, Corweave, is strong.

5:17The next update, guys, we get from Corweave is earnings. Its report, which has yet to be officially announced, but is expected to be released mid-November. That's when management will need to address which AI financing options it has in its arsenal. Worth noting, Baird analysts saying it actually can get away without raising capital this year, but it is modeling about$30 billion in calendar year 2027. It's interesting, Seema, to hear Jensen Huang time and time again trying to defend CoreWeave. And yet we have these data points from around the world, including from some NVIDIA-backed companies in Australia or, you know, Nscale, which had that Microsoft pull out of a lease in the UK.

5:53data points that indicate that it's not just a capital crunch, that there are other factors involved that could delay the buildout here. So it almost seems like he's focusing on this thing, which the market is focused on. But there are other sort of bottlenecks that you can layer on top that could cause this buildout to be much slower than we all think. Oh, for sure. It reminds me of a conversation I had with someone on the banking side who follows these debt deals who said, you know, not only is the GPU value being debated, but also access to power and how that could delay the AI buildout. That in turn puts more pressure on these companies who are financing a lot of this whole buildout with debt.

6:27But your point on NVIDIA, interesting how you would think the market would be positive on this idea that CoreWeave, if it needed to at some point, no indication it will, that it could lean on NVIDIA, which has a 9 % stake in the company and made that $2 billion investment back in January. But despite what Jensen Wong has said to us, CNBC, at that Thanks, Seema Modi. Let's get to Meta now. That stock gave up its post earnings gains and closed 7 percent lower. Julia Borson joins us now with the story. Julia. Melissa, that's right. Meta turned sharply negative on a shift to concern about Zuckerberg overspending on AI.

7:04A range of analysts notes are questioning Meta's plans to do an equity raise after announcing it's issuing non-voting stock, which lays the groundwork to, quote, finance the company's growth. Now, So a measure Meta's credit rating credit risk hit a record high and its bonds weakened. The price of five-year credit default swaps on Meta's debt hit the highest level since the swaps started trading about a year ago. Now, others are flagging some concerns about 2027 margins after Mark Zuckerberg and CFO Susan Lee indicated that 2027 costs would continue to rise. Evercore writing, quote, the spending math remains the issue.

7:40I increasingly think the debate isn't whether Meta can monetize AI. It's whether incremental AI revenue can outrun the infrastructure bill. Jeffries flagging Bear's focus on margins and equity supply, noting a lack of upside in 2027 earnings per share, saying, quote, the big catalyst paths have played out tactically. Another sign of investor concern, free cash flow turned negative in the quarter, coming in at negative$2 billion. Guys? Yeah, Julia, that is really the fascinating debate you cite the Evercore analyst talking about. We don't know counterfactually how fast this company would be growing based on its core business, based on the enhancements it's already made with AI in its ad serving and its products.

8:25And so now you have this idea of everyone in their head has a sense of what the stock would be worth and maybe more if, in fact, Mark Zuckerberg and company were not so intent on just spending until they can't anymore. Yeah, I mean, it's such a complex issue here, Mike, because on one hand, you have the bull case for Meta's AI investment and that revenue growth was stronger than expected in Q3, the guidance stronger than expected for Q4. But then you also have the question of spend. The company did raise the bottom end of its outlook for CapEx this year, and they did not yet give guidance for CapEx next year.

8:59But they indicated, saying various different things that basically came down to this idea they are going to continue to spend and spend more and more because they do believe these investments will pay off over time. But what analysts are asking is, given the run up in the stock since the launch of the Muse AI agent, how much more is this going to all pay off? And what kind of revenue streams will we see coming from these new agentic tools? Exactly. I think we have Western Digital earnings. They are out. Seema is back with those. Seema. I think a really big B for Western Digital on its bottom line.

9:33Get this,$4.64 adjusted. The street was looking for$4.09. Revenue coming in ahead of expectations at 4.38. Q2 guidance as it looks ahead, as well as full year guidance, better than what analysts were modeling. And even looking at gross margins for the second quarter, it's indicating 60 to 61 percent. The estimate was for 57.2 percent. We have comments here from executives in the press release that fiscal 2027, they say, is off to a strong start. They add that we are executing well throughout our technology transitions to meet the growing demand for storage. We're watching the stock up just about 2%.

10:08You would think it's such a big beat, maybe a different move. Perhaps it tells us about just sentiment in general. We did see increase in its dividend. And broadly speaking, this revenue number accelerating 55 % year over year. Mike. All right, Seema, thank you. Yeah, the stock was down actually 6.4 % in the regular session. So just gaining back a fraction of that so far. So could this tech sell-off be just a pause or the start of a deeper reversal? Joining us now is Deepwater Asset Management Managing Partner Gene Munster. Gene, good to see you. I know you're kind of fond in the habit of saying that we're very early with AI as it evolves.

10:43Market is getting a little bit twitchy about things that seem late cycle, at least on the capital market side of AI. How are you reading it? Well, I'm reading what we heard this week, And I think it's important context to this big sell-off here. We heard from Meta, where they have 10 million or so daily active users of Muse, and Zuckerberg is basing the company, the whole foundation of the company, around that next year. That says it's something that is small that he believes will be very big, multi-billion of users on a daily basis in the near term. We've, of course, heard from Tesla and FSD today.

11:18Autonomy represents about 1 % of total ride-sharing miles. the attach rate for FSD has gone from about 15 % three years ago to 70 % today. Something bigger is going on, still nascent. We heard from Jensen today. We heard from Jensen at GTC in Berlin, and they talked about the power of physical AI. And we heard, of course, from SpaceX and this prediction by Elon that they're going to add 10 gigawatts of compute for next year. They'll be about three at the end of this year. So what do I make of all this is that if you look, if you believe that these leaders are competent, you should, I think, imply that we are still early.

12:00And specifically what's happened, the difference that's happened in the last week versus the last three years is these two phenomenons around personalized bots and the agents and them taking 10 to 15x the token usage versus a typical chat bot. And then separately, what can happen around physical AI. Those two collectively are much bigger than what we've seen over the past few years. And so there's a massive disconnect between what we're hearing loud and clear from these companies about how transformative this is going to be and how early this is going to be, and the market's academic willingness to accept that.

12:34And I think at the end of the day, is truth will prevail. And I think the truth is this, is that the world will be reoriented around AI in ways that we fully can't comprehend that are beyond what I think the high expectations are today. And these stocks are ultimately great buys down here on this nervousness, this academic nervousness. I understand the case, Gene. You make a very compelling one, but there is that period in between here where we get from 10 million MUSE users, which is a drop in the bucket compared to all the users across the meta platforms, right? So, I mean, There is potential there, but it is a very small number.

13:13And getting up to the number of a billion, which is typically where Mark Zuckerberg says that's when you start monetizing things, there's a long runway. And in the meantime, the compute costs are very high. So the question here is, do you buy the stock on the hope that this transition period is shorter than what we might think? that that gap will be bridged to what they spend in the monetization part of the phase? I mean, I answer your question with a question is, do you believe Zuckerberg is competent at predicting how things are going to play out? I think that the 10 million users statistically is plenty of data that they have that they can extrapolate how fast this is going to take off.

13:55And for all the conversation around these bots, again, very few people use them. I use them. I is that the fact that he is willing to get on the call, and I forget what the exact language he had, but something like the center of gravity of this company is going to be Muse in a year. I think that speaks to the level of confidence. If that was in a vacuum, if Zuckerberg said that in a vacuum, and we heard different messages from Elon this week and from Jensen, then we should take some concern. But all of them are basically saying the exact same thing. And that thing is that we are scratching the surface.

14:32And I understand that's a well-traveled line, but that is the reality of what's going on. I don't know when this sell-off is going to reverse, but I do know that next year, the street's looking for 38 % growth in CapEx. The real number is going to be probably 70 % or greater. In calendar 28, street's looking for 11%. The real number is probably 25 % to 40%. And if that ends up being the case, I don't know if the stocks are going to react well to that. My sense is they probably will do just fine. I mean, Gene, I'm not sure you necessarily have to conclude that Mark Zuckerberg and his peer CEOs are incompetent, but you can observe that all of the incentives of capitalism in these environments kind of drive you toward overbuild, right?

15:14There's scarcity in the moment. Everyone believes it's going to be kind of like a winner take most or maybe a duopoly. So they all want to be the one. And there's more than one and two and three going for it. So I just wonder how that along the way is going to play out, because if your predictions on CapEx growth for next year and the following year, you know, come about, we're already having a market that's balking at the capital needs right now. The central, we spent a lot of time talking about the costs. One thing we don't spend as much time is thinking about what the potential here is. And ultimately is that, and they met Meta started talking about what the take rate or not take rates.

15:52They didn't give numbers, but about the importance of commerce and muse and that these other productivity applications will be entertainment applications. But that's the part that we still don't know. What we do know is that the number of very clear examples of AI having an impact on revenue are limited. I think Meta is an example where their growth has been elevated over the past couple of years. Google is an example. But beyond that, there's been a lot of experimentation going on and not a lot of substance. And so I think that that is the gap. That's the understanding. That to me explains why people get concerned about the spending.

16:23To your point about like, yes, there's going to be a lot of spending, but ultimately, aren't they just kind of forcing each other to spend more and more and more to stay afloat? And the answer is yes, there is that factor going on, is that there's a competitive factor. But at the core of that competitive factor is a belief that they have. They're not going to spend just because their neighbor is spending or their competitor is spending. They're spending because they have a belief. And that's ultimately what this is going to play out. If they're competent, if they have a good view of what the world is going, then these investments will pay off.

16:54And if they're wrong, then we're at the beginning of the end. I think we're still very early. Gene, it's always great to get your take. Thank you. Thank you. Gene Munster, Deepwater Asset Management. Let's get another check on Western Digital. shares are moving slightly higher off the best levels in the after-hour session, following a beat on the top and the bottom line. Also, dividend increase of 17%. CEO Irving Tan saying in the release, we are executing well to meet the growing demand for storage. Joining us now is Matt Bryson, Wedbush Securities, equity research analyst. He's got an outperform and$650 price target.

17:26Matt, great to have you with us. I do want to get your take on Western Digital's quarter, but at the same time, I'm wondering what you're thinking is, because it seems like almost no matter what these companies are forecasting for their demand and for the expectations for the AI buildout, there is a level of skepticism on the part of investors that just can't be convinced otherwise. Yeah. And part of the problem with my sector, so whether it's semiconductors or systems or hard drives is that everyone's worried about next year. And so what we're getting from these companies are reports telling us that Q3 was great, that Q4 is going to look even better.

18:10And I would say Western Digital was, at least for forecasts, was better than the Whisper. And you see the stock not moving. And that tells you that, yes, it's more about what's going on with the entirety of AI spend, not so much what's going on with Western Digital. And so I guess what are we looking ahead to to maybe have investors be persuaded that we're not watching kind of the beginning of the end and these vendors are going to be, you know, close to the last to know? What we saw last time around was Amazon, Microsoft telling us that they were seeing ROI on their investments, that there were capital returns that were there that would support greater spend.

19:03And what makes me feel better about what's going on in the environment is when I'm talking to the smaller neoclouds, so they're the variable seller out there, their payback time is amazing. It's sub one year on bringing on data center investment. I think if there's that much demand out there for actual capacity, that someone's going to find a way to finance and build it. And so you're still going to need semiconductors. You're still going to need hard drives. and that there's not going to be any end to spending soon, as Gene was just saying. In terms of the projections for data center build, Matt, how much or how big is the asterisk at the end of your forecast in that, you know, we're approaching the midterms.

19:47Data centers are very unpopular. It is William Blair's projecting that there will be seven states potentially after the midterms that will actually enact moratoriums on data center build, which could be about 7 % of data capacity, data center capacity, a small amount, but then you layer on top of that sort of political bottleneck, the power bottleneck, and just the other sorts of, you know, supply, chip supply bottlenecks as well. Yeah, you know, it's a little bit above my pay grade as a lowly semiconductor analyst in terms of what's happening on the data center side. What I can tell you is that when I think about Western Digital, for instance, I think there's over 400 exabytes of shortage in terms of hard drives right now versus what particularly the major clouds are looking for.

20:34That's more than 20 % of the market. And so I think that even if there are some setbacks, there are such shortages in memory in hard drives. And the real problem is supply constraints. And so you're still going to, we're still going to see constraints. I'd also point out what Jensen said earlier, which is if you look at the totality of builds, you have to look beyond the U.S., beyond the West in part two. And I continue to think that as long as we're seeing all this demand for the capacity, that someone will figure out a way to work around constraints, whether it's funding, whether it's power, whether it's just finding space for a data center where you don't have a moratorium.

21:22And so that's what I'm thinking with my numbers. But again, if I'm wrong, I'm a lowly semiconductor analyst, and sometimes I miss the bigger picture. Oh, you're too down on yourself, Matt. We like getting your analysis. Thank you for joining us, not Bryson. And Western Digital CEO Irving Tan will join the exchange tomorrow for an exclusive interview at 1 o 'clock Eastern time. Breaking news on OpenAI, Kate Rooney's got this. Kate. Hey, Melissa. So we are just hearing from sources that OpenAI is closing in on another massive funding round, this time at a$1.25 trillion valuation. So that is pre-money, doesn't include the new cash that's being raised.

22:02They are raising, from what I'm hearing, up to $30 billion. The final size of that round is still being worked out. A source close to this deal told me that investors from the United Arab Emirates and CO2 are going to be leading the round. Both are existing backers. Multiple sources telling me that it has told investors, at least today, that it wants signatures by the end of this week for this deal. Sources describe this as an opportunistic bridge to an IPO, which CFO Sarah Fryer has told investors will come in 2027. There is also a compute deal as part of this, guys. So OpenAI is negotiating a commercial deal with the UAE to secure more computing capacity from that region.

22:41And again, according to sources familiar with those talks, OpenAI has already filed confidentially to go public. And then Rival Anthropic could make its IPO filing public. That S1 could flip in the next couple of weeks here. We're hearing November for that listing date. But that'll be a big test of market appetite for some of these AI labs, guys. All right, Kate, thank you. Kate Rooney, it is eye-popping the amount of money it can raise as a private company. But if you extrapolated and thought, oh, what if OpenAI were a publicly traded company? What would happen to them in today's market environment?

23:13I think it's an interesting opportunity for the market to show that it is washed out. I mean, if you get this funding secured and you get this valuation, I do think that we'll see. If tomorrow it doesn't feed into a backstop type psychology and maybe today was this, you know, real disorderly washout and liquidation type action, you know, that'll be a decent test. Or if they can't get the signatures by the end of the week. Yeah, that's the other problem. But that's basically ballpark figures. $30 billion raise is what people have been keeping placeholder for meta for what they might do for an equity deal.

23:48And the market caps are not that dissimilar, like$1.3 trillion. In addition to today's tech sell-off, we also saw a dip in bond yields, a 10-year giving up a month's worth of gains. Our concerns about the economy starting to crop up. We'll be right back.

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25:55See terms. The S &P 500 and Nasdaq tumbling today on rising concerns around AI spending, while oil prices continue to move higher on geopolitical tensions. So should investors expect these trends to continue? Joining us now is Datatrek co-founder Nicholas Colas. Nick, good to see you. Good to see you. Man, there's a lot to work with here. I thought it would be interesting to start in terms of once we thought we learned what the ironclad correlations were between oil prices and bond yields and bonds and stocks, they get upended. And that's what's going on right now. So what message do we derive from that?

26:31Well, it looks very much like 10 years. We're trading with oil for a good long time. That relationship broke apart in mid-September. And oil began to fall. Yields still went higher. So it's like, huh, what's going on? Today is the tell, I think. Because today you have all this worry about how much money AI companies can raise. And that's taking some of the steam out of real rates, which have been the driver of those nominal rates we've been watching so closely. And seeing a 10 below 5 is a big relief. Yeah. A big relief or a statement that the economy is slowing massively. You pair it with the declines you've seen in financials as well, and you sort of get a picture of an economy that might not actually be performing very well at all.

27:09Oh, it's always a matter of what part of the economy we want to look at, right? That's true. The K-shaped economy is very much alive and well. You know, I was thinking just yesterday, like seeing these companies pull IPOs, you've got a couple of thousand fewer people in the upper end of the K without an IPO. And that alone could be a factor in driving a little bit of that weakness. But no, I think today was solidly the market saying, OK, we can take some of the steam off of real rates because we're not going to get as much AI funding as we thought and feared. Yeah. So there was a lot of the Treasury move higher in yield that seems to have been about AI CapEx overheat that also filtered into, OK, maybe the Fed's going to have to do more.

27:49Because, I mean, nobody was really expecting a hike for next week, but I think it went to rock bottom probabilities that you're going to get a hike. So is this just kind of, you know, one of these standard gut checks along the way of a longer term trend where you're still going to see, you know, AI be the engine of the economy in the market? Yeah, the short answer, I think, is absolutely yes. And I think we've put it into a very long term context. What we're seeing today is the result of 40 years of Moore's Law slowly churning away in the background, making semiconductors ever more powerful for the same dollar of compute.

28:20And along the way, we've had major setbacks like 2000, 2002. But that has been the overwhelming trend. So we end up with an S &P that's 50 percent tech plus big tech. Half of the S &P is this trade. Yeah. And that's amazing. It's more than oil in the 1980 when it was like 28, more than tech in 2000 when it was like 30, 32. We're now at a point where literally Moore's law has taken over the S &P, and that's not going to change. So this is a structural, it's permanent. I mean, we've been saying, you know, when is the market going to broaden, broaden, broaden? Maybe we're not. Maybe this is it. Until some other industry can double in power every two years for every dollar?

28:55No. And it's fascinating in the sense of we keep seeing all these statistics and these superlatives that say, you know, we've had a record number of days this year when the S &P 500 has gone in a different direction from the majority of stocks in the S &P 500. So all of it really is just an outgrowth of that math that you cited, right? You have this hyper concentration. Does that mean that the S &P 500 is kind of anti-fragile now? It's got this resilience built into the structure of it? Or is it kind of just not connected to the parts of the economy that we would want it to be? What are the inferences from that?

29:33There's an old trader saying you trade the market, you have nothing when you want. You describe the market we have, and it's an outcome of a very long trend, which is not set to slow anytime soon. The stock market's never been the economy. It's always been heavily weighted to whatever's working at the moment, but it's probably less the economy now than ever before. And what we're telling clients is if you're really worried about this, go to equal weight S &P, go to RSP, because then you're 16 % tech and you're very diffused. And that security does well over time. The American economy does well.

30:01American business does well. But the market cap weighted S &P, the one we all watch, this is the trade we have. Yeah. If we are to believe that yields have come down and that we've let off some of that excess and it's permanently, you know, we've seen the highest points in yields. Do you go into the most, the hardest hit areas like housing? We saw a big bounce in the builders today, for instance. Yes. We just literally just wrote that yesterday. Yes, absolutely. The home rotors have gotten and destroyed since 2025. Massive underperformance. Still a good sector. Rational capital allocators. Any kind of relief on mortgages is going to help that group.

30:34And we definitely like it. Nicholas, great to see you. Thank you. All right. Tech stocks dragging down the S &P today, but the worst name wasn't a chip or a neocloud. Up next, what's behind the big drop in Moderna?

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32:21Brought sell-off in tech today, but the worst performer in the S &P 500 was a drug stock. Annika Kim-Constantino is here with more on Moderna's big intraday decline. And wow, I mean, it was down 17%. You're exactly right, Melissa. So Moderna and Merck plan to announce detailed results from a phase three trial on this mRNA-based shot in melanoma patients during a cancer conference in Spain this Saturday. If you remember, we got the initial results from this study in August when shares of both companies rallied. But we now have the specific numbers. And despite the pressure on the stock today, oncologists tell me that the data is actually positive here and meaningful for patients.

32:57Merck and Moderna say their personalized cancer vaccine combined with Keytruda cut the risk of melanoma returning or patients dying by 42 percent compared with Keytruda alone in a phase three trial. And the combination also reduced the risk of cancer spreading to distant parts of the body or death by 38 percent. UBS analysts called the results a strong data set that should build confidence in upcoming studies of the vaccine and other cancers. But some analysts say sky high expectations, coupled with a rally in both stocks since August, may have set the stage for a potential sell the news reaction here.

33:31I mean, it's interesting because it's a huge sell off. And yet we just got back to levels from a couple of weeks ago. I mean, the expectations for this cancer drug is so incredibly high. Are there any, does any projections change based on this data in terms of its market, potential market? That's a great question. I haven't seen any kind of analysts change their actual revenue estimates for the actual drug here. We have a lot of analysts actually acknowledging here that there is that difference here between what clinicians are thinking and how the street is thinking about it. But a lot of them acknowledge that this is positive data and clinically meaningful here.

34:05Annika, thank you. Annika Kim-Constantino. Time now for a CNBC News update with Julia Borson. Julia. Melissa, President Trump backed Ohio gubernatorial candidate Vivek Ramaswamy today in his controversial new attack ad featuring the estranged mother of his Democratic opponent, Amy Acton. She lost custody of Acton and her brother after her husband, their stepdad, was indicted for raping Acton. Trump said he suggested the ad should stay up and called current Ohio Governor Mike DeWine disloyal after he criticized the ad as deeply troubling. The Justice Department is reportedly reviewing allegations that Corey Lewandowski profited off of his position at the Department of Homeland Security.

34:45According to the Wall Street Journal, the inquiry into Lewandowski is based on a referral from the department's internal watchdog. He served as the top advisor to DHS Secretary Kristi Noem. Both were ousted in March. And Art Basel announced today it is closing its Paris fair early as France braces for another weekend of protests and possible riots. The event was scheduled to run through Sunday, but will now end on Friday. Art Basel said the decision was in the interest of safeguarding visitors, exhibitors, partners, staff and artworks. Back over to you. Julia, thanks. Coming up, we'll get BlackRock's view on today's move in yields and what the continued AI CapEx spending means for bombs.

35:33Welcome back to Closing Bell Overtime live from the Nasdaq market site. A big tech sell-off in the market today with the Nasdaq off more than 2.5 percent. The Dow managing to eke out small gains. The S &P 500 losing 1.2 percent. The Semi-ETF posting its worst day since June with every member ending lower. Big moves lower for Lamb Research, Teradine, Marvell and AMD, all of them off more than 8 percent. Memory also weak, including SanDisk, Seagate, and Micron. CoreWeave, the poster child for the recent tech sell-off, taking another hit off 10%. Market concerned about whether or not it will need to lean on NVIDIA for further financing.

36:12Meta sinking on worries about Mark Zuckerberg's overspending on AI. So what did work? Apple, the only MAG7 stock closing higher. Some green in the retail sector as well. Kohl's, RH, and Lululemon, and Best Buy all up more than 6%. Home builders higher, too, as rates fell. And Bloom Energy lower in after-hours trading. EPS and revenue beating. The company raising its full-year guidance above estimates. The free cash flow was below expectations. Stock off 5.5%. Another mover in after-hours is Decker's Outdoors. Brandon Gomez has the note. Yeah, let me add to that list, Mike. The Ugg and Hoka Seller reporting a miss.

36:48Broadly across revenue, you can see shares down about 8.5 % right now. Revenue is coming in at$1.48 billion. That's below the$1.5 billion that was expected. First revenue miss in five years here. Both Hoka and UGG revenue for the quarter also falling below expectations. The company also reported direct-to-consumer comparable net sales fell 6.4%. Adjusted EPS did come in at$2.31, but we're not doing a comparison because there was a reported tariff benefit of about$0.28 there. And look, the footwear category more broadly, of course, has been a dicey space, particularly in casual footwear. Performance remains competitive against names like Hoka, rather On Running, as well as Adidas.

37:27And again, those brands still growing. So the earnings call just getting underway. I'll bring any highlights as they become relevant, guys. All right. Shares down 8.5%. Brandon, thanks. Brandon Gomez. Meantime, investors piling into treasuries during today's equity sell-off. The yield on the 10-year falling below 5 % for the first time in a month and a similar move in the two-year at the lows of the day. The 10-year yield saw its biggest move lower since March 2023. That's when Silicon Valley bank collapsed. The VIX spiking as well. Joining us now, Jeff Rosenberg, BlackRock Senior Portfolio Manager and Systematic Fixed Income.

37:58Jeff, good to see you. Good to see you guys. What do you think the driver was to that move lower yields? Well, it's pretty clear. It's the opening that you just talked about, the 8 % in the semis, the AI off. It's a bit of a repeat of what we saw all of last week, we saw today. And it's particularly interesting in light of the oil moves. So the bond market, we know what it's more concerned about. It's more concerned about the macroeconomic impact of distress on the AI side. It's interesting because this was a real world, you know, experiment to say, OK, what is what a treasury is going to respond to?

38:33And as you say, the AI CapEx concern clearly was a big part of it. But was it all of it? Because there were so many rationales that were thrown around saying, well, It's much more about resilient U.S. economy and real rates going higher. The neutral rate might be higher than we thought. And all these other explanations for why yields might have gone to 5.3 on 10s. And we talk a lot about this in our recent fixed income outlook. Why did yields go up? And was the bond market freaking out when yields were going up? And our answer was no. It was about two major factors. The change in the real growth outlook.

39:07And that's the support from AI, clearly, on both sides. Investment and consumption through the wealth effect. We're having a very big contribution, almost all of the growth coming from the AI dividend. And then you had the inflationary part of it. So we've got the oil concerns, distillates, the secondary effects. That's sustaining higher inflation. The combination is higher nominal GDP. So that's where you get higher rates. The bond market is rational. And now what we're seeing is that if there's a concern around AI and it's maybe not as strong, then the impact is to reduce some of those very factors that led the interest rates to go up.

39:43And there's also the little impact on the front end of the curve of maybe repricing. How quickly is the Fed going to be willing to raise rates if you have some financial market conditions tightening coming out of what we saw like today and last week that pushes back the expectations on their policy moves as well? In terms of a bit of safety play for U.S. Treasuries, how much of a factor is France with its yields above 5 % now? Well, let's just say France doesn't get the bid to safety. And the concern is on the fiscal policy side. And what does that mean to the spillover to the U.S. and longer term interest rates?

40:19Those are longer term concerns. And I think the issue is about the short term reaction will be to what's in front of me today, which is I need a diversifier in my portfolio against a lot of concentration risk everywhere. Everything all the time is AI. And it's everywhere in people's portfolios. So where do you find some diversification? What we're finding out today, we found out last week, there's very few places to hide away from the AI theme. And one of those places is the fixed income market and treasuries. And so in the short run, that's going to overwhelm these longer run concerns. They're still with us, believe me.

40:56That fiscal policy concern, the concern it has for the back end will be there. But it can be overwhelmed in the short run by these. The credit markets have obviously gotten antsy about various types of AI data center exposure. You keep seeing these charts of things like triple C rated spreads blowing out. It's a very tiny sliver of the market. But is there the potential for, I guess, a broader repricing of credit? Do you think that there's something that's going to bleed through that's going to have macro impact? So I think there's a couple of things to disentangle here. First, part of the AI story that has changed so much.

41:28Remember, the original part was, oh, it's all being financed by internally generated cash flow. And it's a marvelous thing. They finally have something to do with their cash. Fast forward a couple of years and the size of the capital expenditure build out requires the biggest market in the world to finance it. And that's the public bond market. So you're seeing the public bond markets now with its transparency start to price those risks. And so that's giving a little bit of indigestion because the size of the amount of financing that has to come through is overwhelming. even the largest public bond market.

42:00That's one of the issues. The second issue on CCCs, that's not a new story. It's been widening for some time. And you're seeing a repricing of credit risk because of some of the idiosyncratic risks that are happening inside those markets. Some of it is technology and AI related, but some of it is just legacy related to refinancing, the refinancing window, low financing costs, the interest rate shock, and the idiosyncratic nature of the individual companies and sectors in those markets. All right. Good to see you, Jeff. Appreciate your time. Thank you. Well, coming up, concerns around AI uncertainty have been pushing investors toward defensive stocks as they look for stability over growth.

42:38That's pushing valuations higher. We'll dive into that now.

42:52So this rush for stability in markets we've been talking about, really evident in the relative valuations of S &P technology versus consumer staples. You see they're kind of meeting in the middle here, right around 21 times forward earnings, both still trading at a slight premium to the overall market. You see after this long, you know, let's say three or four year period when technology had this clear premium on the individual stock level. Take a look at Procter & Gamble. A big upside mover today had pretty good results and guidance and relative to Alphabet. They also have crossed over here. But you see, it's not always been unusual for the bellwether of consumer packaged products to actually trade at a big premium to media and tech.

43:35You see, it was the case most of the time over the prior couple of years. And then the excitement over, you know, Google's AI prospects obviously got us up here. So valuation is almost never the reason to buy staples as a group. It's much more about, oh, they're kind of bond-like and the dividends, and they're not going to hurt you in a recession, things like that. So we'll see if this is just kind of fast money finding a place to park for a while or a real change. Yeah, and it'll be interesting to see also, I mean, Procter & Gamble is saying strength and detergent and things like that. But, I mean, I'm sure there are others who are going to say the consumer is under duress.

44:03We'll see how the season goes in terms of the guidance on consumer appetite for these brand names. And by the way, more than Procter & Gamble rallied today. So it was kind of like it was trading as a group as opposed to just their good news. Just ahead, the tech trade isn't seeing big declines here at home overseas. They are seeing big declines here at home. Overseas markets are getting hit as well. We'll dive into that next. Closing Bill Overtime Live from the NASDAQ Markets. I'll be right back. We'll be right back.

44:37Breaking news out of Washington. Eamon Javris got the details. Eamon. Melissa, that's right. President Trump answering some questions about Elon Musk here, talking to reporters at the White House on his way out to a campaign stop. The president was asked about the Wall Street Journal report earlier today, which said that he had called Elon Musk earlier this week and asked him to restore connectivity to Starlink for the Ukrainians. The president was asked if that was the case, and he said, I don't want to comment on it. You know, whether I called or whether somebody else called doesn't make any difference.

45:11I guess the bottom line is he put it back. So the president not confirming that Wall Street Journal report saying he just simply doesn't want to comment. But seeming here, Melissa, to acknowledge that he thinks that the decision to cut off the Ukrainian access or throttle down the Ukrainian access to that technology was the wrong thing to do. He says the bottom line is he put it back separately on Iran in the midterms. The president was asked if there's a political price to pay for the Iran war. And what he said was in one way, they presumably voters love it because I'm doing what should have been done by other presidents.

45:47In another way, maybe they don't. It's there's a price to pay, which I knew immediately when I did it. But we can't let Iran have a nuclear weapon. So the president acknowledging here that there may be a political price from his decision to go to war with Iran earlier this year, but that he feels strongly that it was the right thing to do on the merits. Melissa, back over to you. The president also made some comments, Eamon, correct, about potentially an escalation before the midterms when so many people thought he would wait until after the midterms. Yeah, that's right. He said, you know, yesterday he said a lot of people think it'll wait until after the midterms, whether it's after or before.

46:23We'll see what happens. So one of the questions here is, you know, how large does the political calendar loom over these military decisions? You know, you could see the president who has said and said earlier today in a social media post that he feels the Iranians are trying to drive up oil prices ahead of the midterms. You could see him wanting to take some action before the midterms to deal with that. Right. And in his view, the Iranians are affecting oil prices and hurting his chances in the midterms, his party's chances. So therefore, there'd be a need to do it before the midterms. On the other hand, as he just said in the statement, you know, there's a political price to pay for that.

47:04The Iran war is unpopular and doing that just before the midterms might hurt Republicans. So a lot of calculations, not just military going on here. Eamon, thanks. Eamon Jabbers. You bet. Let's take another check on Western Digital because we had the earnings at the top of the hour. The stock is now down 7 percent. After our session, lows have down 9 percent. But still, this is a very sharp decline here. Yeah, it's 55 percent off its highs. It was down 6 percent during the regular session. So clearly, market not being reassured. I almost wonder if South Korea, how it trades overnight, is going to help dictate the open because that was setting the tone for negative tape today.

47:38That's going to do it for overtime. That's when he starts right after this quick break.

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