AI Sell-Off, Data Center Policy and the Space Race After Midterms 11/6/26

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1:05I'm Leslie Picker and this is your morning call.

1:23Good morning. I'm Leslie Picker in for Morgan Brennan, who is in Florida this morning, joined by two very special guests, Morgan. Leslie, it's good to see you. That's right. I'm here at Kennedy Space Center. I'm actually at the historic space shuttle landing site where the up summit is taking place. You could see some of that behind me, actually, including, well, they're undercover right now, but you've got the Tesla Roadsters, the flying cars, a number of aircraft. Basically, when it comes to the future of mobility, everything is here and sort of on display. Also later today, President of the United States is going to be making appearance.

1:55His first one, his first public event since the outcome of the midterm elections. But in the meantime, wow. For this hour, do we have a number of special live guests for you here from the Upsummit, including Governor Glenn Youngkin, former governor of Virginia, former co-CEO of Carlyle. And we also have Kathy Wood of ARK Invest, too. So given the fact that the story this week and what's been a turbulent week for markets is really about the intersection of investment and policy, We're going to get into all of it, including what all of this means for AI data centers and the tech trade more broadly.

2:30So stay tuned. Leslie, I'll send it back to you in studio. Morgan, I can't imagine a better lineup given the news of the week. Really looking forward to that. We will see you shortly. Let's get right to the markets and the U.S. stock futures. On the back of yesterday's sell-off, you could see a bit of a mixed picture. The Dow implied to open down about 400 points. The Nasdaq implied to open up about 372 points and the S &P up roughly 31 points at this hour. Of course, the U.S. market suffering their worst single day since April of last year, just after President Trump's tariffs announcement, if you recall.

3:04Yesterday, the Dow shed nearly 3.5 percent, the S &P down over 4 percent, And the Nasdaq down 5.5%, losing an estimated$2.5 trillion in total market cap. The Magnificent Seven alone losing more than a trillion dollars of that market cap with NVIDIA, leading the losses there, dropping more than$440 billion in market cap in a single day. And that stock, that widely held stock, is now negative for the year. The sell-off not contained to tech, though. Discretionary giving back all of Wednesday's 4-plus percent gain. Retail and travel-related stocks, the big losers. Similar story in financials, the XLF ETF down nearly 3 percent.

3:48The big banks falling between 3.5 and nearly 6.5 percent. A check on the VIX seeing a massive spike around yesterday's selling. Right now down a bit, down about 7 percent to 26.14. Another thing to keep an eye on is treasuries as investors prepare for the monthly jobs report. Such a busy week out at 830 a.m. Eastern time. Right now, yields moving slightly higher. You can see the 10 at 484, the 2 at 448 at this hour. And checking on energy with WTI and Brent snapping a three-day losing streak yesterday. Still on pace to break their four-week winning streaks right now. down slightly. Ice Brent down by 1.21 percent at 97 and WTI down about a percent at 89.53.

4:40Yesterday, sell-off carrying over to the overseas markets as well. That's been a huge phenomenon as of late. Steve Sedgwick is in London with what those markets have been doing. Hi, Steve.

4:55Yeah, really nice to join you today, Leslie. Look, the Asian stocks tumbled, as viewers will be able to see over my shoulder. In today's trade, the sell-off, of course, on Wall Street bleeding into Asia. The rout in AI continued to batter, especially Japanese and South Korean stocks, triggering a circuit breaker on the Kospi, with the Nikkei falling into bear market territory. While we talk about the Nasdaq at the Composite N100 going into correction, we've actually got bear market territory on the Nikkei in Japan. Semiconductor stocks, of course, coming under heavy selling pressure yet again.

5:31South Korean heavyweights, SK Hynix and Samsung Electronics, the massive weighting, way bigger weighting on the Cosby than the US majors on the S &P. Well, they dragged the cost below it and the world's largest contract chip manufacturer, TSMC, in Taiwan, pulling the Tayex down to post its largest single day drop in history. SoftBank, also amongst the biggest losers in Asia, as exposure to AI bets causes investors to turn bearish. Quick look at the European markets for you as well. The benchmark Stock 600 suffering a 1 % decline in early trade with most major borses in Europe down. media, household goods, as well as healthcare were amongst the weakest performing sectors in early trade.

6:13European chipmakers appear, though, to have dodged the brunt, with some of the key names like ASML up around about 3%. Leslie, back to you. Steve, thank you. The AI sentiment, clearly a global phenomenon. Let's dig further into the market action and bring in John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management, and Dan Ives, Partner and Senior managing director at Yorkville Ives & Co. Dan, I want to start with you because we were talking before the show just in the green room here about how yesterday's market activity was once you've maybe five situations like that in your entire career.

6:47What about yesterday struck you as so unique? And what do you think it says about just the durability of the sell-off?

6:56Dan Ives: Yeah, I put it in the March 2020 COVID sell-off, the April 2025 liberation, even some of the times during financial crisis, it felt just like a panic, almost mini crash from a tech perspective. To me, and we've talked about it, does the blue wave ultimately really next year is where CapEx peaks out at instead of 28 or 29? Yeah. Are there neoclouds and other names that should have been down? 100%. But tech stocks were trading like the AI revolution's done, like the blue wave is going to basically blockade this. And I think that is way the wrong move. I mean, to me, I view it as sort of almost a generational buying opportunity for the tech winners because, as we've said, demand is four to one relative to capacity.

7:44Dan Ives: So I think that's where, as calmer heads sort of prevail, we're going to look back at this and being this was just a magnitude of a sell-off that I'd put in a top five that I've seen in the last 25 years. So what I'm hearing from you is it's more technical in nature. Maybe there was a bit of a short squeeze coming out of the midterms on Wednesday, and then everything reversed. What I'm trying to wrap my head around is kind of where the market sits with regard to AI sentiment right now, because it's massive swings on a day-to-day basis. Yeah, I think some of it is that you saw a lot of comments from politicians on social media and others saying we're going to end AI, we got to shut it down.

8:25Dan Ives: But the reality is that the permits are already there, even in Texas. I mean, 75 % of those data centers for 27, 28 are already approved. So I think that's where when you start to go into it, and you've seen the governor from Texas has talked about it. I think there's a calming that needs to happen where data centers need to be built in the right way. But the reality is that when you think about the 35, 40 gigawatts that's going to come on into next year, even if 10 to 15 of that doesn't happen, demand of supply is 4 to 1. And that's bullish for chips. The hyperscalers, the compute, the capacity that they own is so much more valuable than it was 48 hours ago.

9:05Dan Ives: And I think that's where we view this for the winners that you need to own these. When I look at NVIDIA, AMD, the way it's sold off. But Neoclouds and some others, those should be done. The power companies, you know, Jeeva and Ova and others, that made a little sense. No, you bring up a good point, this idea that if there are additional moratoriums that get imposed as a result of the midterm elections, those who do already have the compute have this benefit of scarcity and could therefore maybe command even higher prices if you're lucky enough to currently be sitting on the compute as many of the hyperscalers are.

9:37John, I want to turn to you. Do you agree with Dan this notion that the sell-off was overdone and is basically pricing in AI as a non-event at this point in time? Leslie, I've got to say, you know, the funny thing is Dan and I haven't spoken since, Oh, probably a couple of months ago when we ran into each other at the green room of another major financial media studio. And I was thinking the same thing. At 1230, I wrote some notes to your producer. And I look at this. A lot of this was on technicals. A lot of this had to do with unwinding of trades that had been put in by highly leveraged investors.

10:17We're looking for sources of funding for further diversification. sort of to lick their wounds. And the reality is AI is well established already. The adoption rate is rolling. There are many data centers already in the process of it, as Dan was saying, and in existence. And also what it can do for the communities. I think, you know, to misinterpret the election results that just occurred as being something that will destroy technology in the United States would be a big, you know, it would be really a big mistake. Technology is where our leadership is. It keeps us ahead of China. It's a creator of jobs.

10:59The new jobs that will be created by AI will be likely surprise people when they see them. Most recently, I was in Louisiana at the University of Louisiana, Monroe in the northeast section of the state. Last year when I was there speaking with the students and with leaders of the community, they were looking forward to seeing Meta build a very large data center close to Monroe. A year later, eight out of nine parishes in that area are doing phenomenally well. Jobs are being created. They've got an addition of about 8 ,000 people moved in to build this data center. They estimate there'll be 1 ,000 of those left afterwards.

11:43But in the meantime, what it's doing for the community is building jobs, new businesses that will keep many of the students when they graduate. Instead of leaving the community, there's actually going to be opportunities for them to stay and be able to be in a thriving community. So we think you don't want to believe the negative pitch book here. And the other thing I noticed is that, you know, the VIX spiked yesterday, a little bit over 28. This morning, it looked like it was around 25, I think, 24. Looks good. Usually what you have is after one of these things. We'd say the market puked out the results of the election yesterday, and a lot of that on technicals and a negative pitch book that projected any outcome to be negative and devastating to AI.

12:34And whenever we talk to people who are using AI, they're happy about it. It's the adoption rate when it comes to business, the consumer and the leisure user is really very is very widespread. And we think it'll keep you growing. All right. John Stoltzfus, thank you very much. Dan Ives, we will see you later with the Morning Call crew. A lot more to come here on Morning Call, including much more on the market sell off and text continued tumble. ARK Invest's Cathie Wood speaks exclusively to CNBC, laying out her view on the sector and the stocks she's buying. Plus, the Democrats looking to turn up the heat around the AI data center buildout.

13:12Glenn Youngkin, former governor of Virginia, home to the most data centers in the U.S., is standing by to weigh in. A very busy hour still ahead when Morning Call returns.

13:29Oh, look. You just got added to a meeting about coordinating another meeting to prepare for the pre-meeting ahead of the follow-up meeting, which will, of course, require a recap meeting. And then another meeting. Hit your booking point, book with Southwest, and enter airplane mode.

14:19monitoring at simplisafe.com slash sxm. Outdoor deterrence plans start at$49.99 a month. Visit simplisafe.com slash licenses for alarm license information. AI is here transforming how we work, live, and lead. And the women I talk to aren't waiting for the future, they're shaping it. I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, women leading in the age of AI, wherever you get your podcasts.

14:58Welcome back. Let's get a check on shares of stocks that are key to the ongoing buildout of data centers. Names like Quanta Services, Sterling Infrastructure, Eaton, Forgent, and Digital Realty falling between 5.5 % and nearly 19 % yesterday. This morning looking to recoup some of those losses, though. This is congressional Democrats' signal following the midterms that they want to take on the artificial intelligence buildout, specifically data centers. Our Morgan Brennan joins us now with a special guest, one of the foremost experts, at least in terms of politics, on that particular issue. Morgan.

15:39That's right, Leslie. I am joined now. I'm here at the Upsummit Kennedy Space Center. I'm joined by Governor Glenn Youngkin. It's great to have you here, former governor of Virginia, former co-CEO of Carlisle, your partner and chairman now at Red Cell. We're going to get into that, too. I can't think of anybody more perfect for us to be talking to here today, given what we've seen in the markets about the intersection of investment and policy. How do you see this moment we're in? Well, first of all, the summit that we're at has reiterated the fact that America is winning the space race and it is a race.

16:13And we've got to win. And the the technological advancements, the ambitions to actually go further, to do new things are really both inspiring. And I would say they make you feel like like America is the great country that it is. I mean, we've been talking about we're back and listen, we're winning the space race. The second thing that I've clearly recognized is we have to win the space race and we're competing against China. And it's clear that they have way up to their cadence. They have an ambition to get to the moon. We got to get there first again with a man's lunar landing. But they're also launching satellites at an extraordinary pace.

16:55They now have a killer satellite that has been disclosed. And so this is also a huge national security moment for us. And then finally, the progress that is being made is real. So I've been to this UPSummit now three years. And every year we see companies taking huge strides. And that brings capital, that brings new talent, and that allows America to win. And so we're at a moment where we're breaking out when it comes to next generation space. And that's really exciting to have seen this week. Yeah, for sure. I mean, case in point, the fact that this summit is happening here at Kennedy Space Center for the first time.

17:33There's also a race afoot between the U.S. and China. So given the outcome of the midterm elections, given some of the commentary we're getting from both current and incoming lawmakers, is there a real risk that the U.S. slows down here? Yeah, we can't slow down. And I think this is part of a moment of real leadership to step forward and say, listen, we have got to win. coming in second is not an option. If we're going to be the great country that we have been, we need to continue to lead when it comes to technological advancement, when it comes to space exploration. And we have this commercial infrastructure that just blows away anything that China could have.

18:16There are still a state run centralized approach. And we have the entrepreneurial spirit of commercial infrastructure that is just unbelievable. But we have to win. And the idea that we're going to jam on the brakes and stop technological advancement, I think, puts America's national security really at risk. As the governor of the Commonwealth of Virginia, I mean, country's capital of data centers, perhaps data center capital of the world, lessons learned from that process. And what does that mean in terms of, I guess, how would you share your insights in terms of regulating data centers or not regulating data centers as we are at this critical moment?

18:59And it does seem like there's going to be more competition between states now. Well, I've been a loud voice for a while that our data center development industry, from the hyperscalers all the way through to the large language model developers have really failed to recognize that you don't impose on people. And you actually have to go convince folks that what you're doing is going to be good for communities and therefore you partner with them. And this is where they've missed. And what we need to recognize is communities have concerns. They have concerns about power and water and noise and emissions.

19:36And I think there are really good answers to all of these concerns, But you have to engage. And I think that's been one of the huge misses. And I've warned everyone that this was going to be a miss. And we needed to get engaged with communities. Second of all, these are local decisions. And therefore, communities have the ability to say, I either want a data center development or I don't. And if you don't want one, then they're going to make their voices heard. Now, there are other communities that do want them, and we are seeing development around the nation. But these issues around power and water and noise, there are really good answers, but you can't just jam them down people's throats.

20:15And then finally, we're going to need to build these. And the bottom line is we're going to need to engage in a process that addresses these fears. And they can be addressed, but we just can't say, oh, we're going to dump a data center in your backyard and you have to take it. Now, one of the big interesting, of course, next generations is are we going to do data centers in space? And I think we've talked about it this week here at the UPSummit. And this is a real this is a real strategy that is viable. And of course, that gets us back to the race with China. Who's going to get there first? And I think this is another way for us to innovate our way through, of course, power solutions that include Commonwealth fusion systems.

21:00That's going to bring in fusion technology and fusion power generation to to to waterless data centers, to noise suppression, to make sure that we're we're through the technological evolution that America constantly leads it, that we are, in fact, addressing these concerns. But on top of that, the idea that we can take take data centers into space and create a capability that really does, of course, address all those concerns is pretty awesome, too. Yeah, it has been a key topic of conversation here at the Upsummit, something I spoke with Blue Origin CEO Dave Lemp about, too. In general, very successful tenure as a Republican governor in a blue state.

21:42How do you see this moment for the Republican Party? And what insights would you share in terms of being able to get things done on the federal level now? Yeah, well, let's just begin with the clear observation that Tuesday was incredibly rough. And I think there was a real statement from the American people that were angry and they expressed themselves. And they're angry because the cost of living across America is the top issue always in voters' minds. And they were reminded every single day when they drove by a gas station that it was really expensive. They were reminded every day when they got their power bill that that there was runaway power prices.

22:28They were reminded every day at the grocery store. And so that is at the heart of what we saw on Tuesday was Americans expressing a real frustration that cost of living hasn't hasn't come down. The second reality of Tuesday is I don't think people should read that. I hope the Democrats don't read that. It's this was some giant mandate for the broad base of of the what I view as a far left agenda that is not keeping with American values, because we saw across many, many states ballot initiatives that, in fact, represented, I think, once again, this concept that Americans are worried about their own finances.

23:07You had states that elected a Democrat governor, but put limits on the ability to raise taxes. You had states that elected a Democrat governor that demanded that voter ID, a picture ID be shown when you vote. You had states that elected a Democrat senator that voted about initiative to keep men out of women's sports. And so I think what we're, of course, clearly hearing from the American public is that we're angry about the cost of living and we got to go to work to address that. And I think part of the responsibility when I was governor was to make sure that I was delivering on the things that were most important to voters.

23:46And we reduced taxes and and and eliminated eliminated the grocery tax and and reined in college tuition increases and made sure that we were providing support for families that need help with child care. I mean, we were these are the kinds of things that I think the American people just consistently need to know that we're going to work in order to take care of your pocketbook. You going to consider a run for president? Oh, gosh. I think that anybody talking about 2028 didn't hear what happened on Tuesday. And the reason is the American people are tired of elections. Let me tell you, anybody who gets a text from a political organization is now putting that political organization on my dead list.

24:25I think what what Tuesday showed us all is pay attention to the here and now. Pay attention to what I need you to do as my elected officials. I mean, we are granted when we are elected to office a license to lead, not a permanent position, a license. And they want us to go to work for them. And I think one of the big messages from Tuesday this week is pay attention to me now as the American people and go to work for me. And I think that's what all of our elected leaders should be doing. All right. Governor Youngkin, it's great to speak with you here at the UPSUM. I appreciate it. Great, Morgan.

24:56Thank you so much. Leslie, I'll send it back to you. But coming up in just a little bit, we have Kathy Wood of ARK Invest, too. We're going to continue some of this very big, broad conversation about this intersection of investment and policy and data centers in space. I suspect she has some thoughts on this as a major investor in companies like SpaceX. So stay tuned. Yes. The topic du jour, Morgan. Great interview and looking forward to the next one. Thank you. So straight ahead, a look at some of your morning's earnings movers, including why investors aren't rolling the dice with DraftKings down over 20 percent free market, 20.7 percent declines right now.

25:36As we head to break a check on SpaceX and Tesla shares after falling 9 percent and 10 percent respectively yesterday, you can see SpaceX is up about three and a half percent, Tesla up about one and a half percent. but SpaceX still below that IPO price. SpaceX down 6 % for the week, Tesla down 13.5%. The two have shed over$420 billion in combined market cap in the two days after the Democrats' midterms victory with expectations. Elon Musk and his companies will face probes and steeper regulatory hurdles to their AI and merger ambitions. Morning Call is back after this.

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27:13Outdoor deterrence plans start at$49.99 a month. Visit simplisafe.com slash licenses for alarm license information. AI is here, transforming how we work, live, and lead. And the women I talk to aren't waiting for the future, they're shaping it. I'm Julia Boorstin, senior media and tech correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers women leading in the age of AI, wherever you get your podcasts.

27:50Let's take a look at some of this morning's earnings movers. Shares of Airbnb spiking after beats on the top and the bottom lines, but this may be contributing to the pop in shares. The company says it plans to launch an AI travel agent for users sometime in the first half of the year. Shares currently up about 11.8 percent. Shares of software company Atlassian heading in the opposite direction after its revenue outlook, particularly data center revenue growth, disappointed Wall Street. Those shares down 14 percent. And DraftKings also getting hit after the sports betting platform posted a bigger than expected loss.

28:29The company also lowering its full year revenue forecast. Those shares down 20 percent. Just some massive moves following these earnings reports. Still on deck, ARK Invest's Cathie Wood is standing by her view on yesterday's tech sell-off, the continued pressures around the AI trade, and where she's buying right now. Morning Call continues next.

28:56Good morning. I'm Leslie Picker, in for Morgan Brennan, who will join us in just a moment with ARK Invest's Cathie Wood. But first, let's get right to U.S. stock futures on the back of yesterday's sell-off. Right now, we're seeing a bit of a mixed picture. The Dow implied to open about 500 points lower, but the Nasdaq seeing a rebound of about 336 points at this hour in terms of its implied open and the S &P up about 21 points. The U.S. markets, of course, suffering their worst single day since April of last year, just after President Trump's tariffs announcement. Yesterday, the Dow shed nearly 3.5%, the S &P down over 4%, and the Nasdaq down 5.5%, losing an estimated$2.5 trillion in total market cap in one day.

29:46Another thing to keep an eye on is treasuries as investors prepare for the monthly jobs report out at 8.30 a.m. Eastern Time. Right now you see the 10-year holding above that 484 level. The two-year just switched back into, well, you can see it's kind of around the flat line in terms of its movement. 447 is the level for the two-year right now. And checking on energy with WTI and Brent snapping a three-day losing streak yesterday. Still on pace, though, to break their four-week winning streaks. Right now a little bit lower. WTI is around 90.46. IceBrent is 97.97, just about a third of a percentage point lower there.

30:31Sticking with the markets and yesterday's sell-off with tech leading the March lower, the Magnificent Seven shedding more than$1 trillion in total market cap with NVIDIA leading those losses, shedding over$440 billion in market cap. That stock is now negative for the year. Other chip names not spared yesterday like Micron, Advanced Micro, Broadcom, Intel and Applied Materials down between 10 and 17 percent. There's a lot of leveraged ETFs around some of these names. There was a lot of crowding into these positions, although it had been somewhat flushed out going into the midterms. But still, you know, unwinds and potential technical factors leading to these significant double digit percent drops yesterday.

31:17This morning, though, looking to recover some of those losses. You can see Micron now up about 7.7 percent. AMD up about 7.3 percent. And Applied Materials AMAT up about 7 percent, seeking a rebound. Neoclouds also getting whacked, of course. CoreWeave, Nebius, Iren down between 10 and 17 percent yesterday. And those, of course, are also looking to bounce back a bit in the pre-market. You can see Corweave up 6%, Nebius up 6.75%, and IREN up more than 15%. Getting a little bit of whiplash this week. Let's dig further into the tech trade and get to our Morgan Brennan, who's joined by a special guest on that.

32:03Hi, Morgan. Hi, Leslie. That's right. I'm here at Kennedy Space Center at the Upsummit. I'm joined by Kathy Wood, the CEO and CIO of ARK Invest. It's so great to have you here. It's great to be here. I mean, there's so much to get into. I'm going to start off, though, by asking the same question I just asked Governor Youngkin, and that is this intersection of investment and policy and what it means for the markets right now. How do you see it?

32:26Cathie Wood: Well, you know, being here at this conference, what I'm seeing is something bipartisan. You'd never know that the election took place listening to the leaders here, the founders of this conference. And I think one of the things that they are learning, and I do agree with Governor Youngkin on this, especially on the data center side of things. I know that data centers here on Earth have become problematic. I do think that there's a way to approach communities, and I totally agree that we have to be more sensitive there. But I also think this has given data centers in space, you know, a more of a reason to exist and that more people understand it now and more people believe it is possible.

33:11Okay, I want to get into that a little bit more here in just a moment. But first, just to touch on the other comment you made here. I mean, there was an interview last night with Governor-elect of Texas Gina Hinojosa on CNN, where she basically said, I'm not against data centers. I want to make sure they're not taking advantage of Texans. In general, it seems like the devil's in the details. There's going to be a lot of nuance in terms of any policy that gets crafted moving forward, and obviously on a state-by-state, local basis here. But it's important to also note, I think, that there's a lot of good union paying jobs.

33:44A lot of the unions support data centers. And I suspect there's going to be more policymaking within the party that maybe doesn't mean it's an all or nothing moratorium for AI data centers. Is that how you're assessing it from an investment standpoint?

34:01Cathie Wood: Absolutely. Absolutely. Absolutely. It brings jobs and according to our research, longer term, it will bring more power and lower electricity prices into these communities. Right now they're thinking about higher electricity prices and we're seeing natural gas prices falling here in the United States. This is locally priced. Natural gas powers a lot of our electricity. and I think that is going to start coming through. It's a market force that will come through and I think ameliorate some of the concerns out there. We do know OpenAI and others are saying, hey, yes, we have a responsibility here and we're going to shoulder some of the costs that these communities are facing in the short term as we build out this infrastructure.

34:53Cathie Wood: But longer term, longer term, it is going to accrue to the benefit of communities that invite this kind of activity into their state. You know, here in Florida, it is interesting, very business friendly state, very progressive in terms of capital friendly and so forth. But against data centers, which, you know, I've been very vocal to now Governor Donald saying, wait a minute, do you understand the jobs that you're leaving out now that we are probably one of the will be considered one of the most business friendly states. If we don't have data centers, we won't have the infrastructure we need here.

35:34Cathie Wood: So I'm speaking to you, Florida. And of course, he's been here as well. And SpaceX and Tesla both have a presence at this conference. Yes. The fact that Tesla and SpaceX Six Together combines lost$420 billion in market cap combined since the midterm elections. There's top holdings for you across a number of funds. Is this overdone or are there real concerns, real risks here coming off of the midterms for these companies? Well, we post our trades every day, so you can see we've been buying them. And actually, because they are two of our highest conviction names, when we go through a correction like this, we will concentrate towards our highest conviction names.

36:18Cathie Wood: If anything, Robotaxi has hit escape velocity, delighting consumers. This is the moment we've been waiting for. So we're not worried there. There may be, I mean, Elon Musk may be pulled in to testify and so forth, but he is a maestro at compartmentalization like no one else I've ever seen. And in terms of SpaceX, I think data centers in space might be a little more important now than many people might have thought. It solves a problem. And we're learning so much more about the possibilities in space, including powering up these data centers with nuclear. Radiant here yesterday talked about that the CEO very very compelling so not just solar but nuclear in space hmm I want to talk about another company a private company that is among your holdings in our venture fund anthropic expected to go public later this month it does what we're seeing the market turbulence that we're seeing right now angst about AI does does that change potentially the calculus or at least the valuation coming to market what do you think Well, we don't know.

37:41Cathie Wood: The rumor is 1.5 to 2 trillion, and we don't know exactly where that's going to land. I would say maybe this environment puts it more at the lower end. But if you look at the S1 that Anthropic published in order to go public, the numbers are astonishing, astonishingly strong revenue growth, of course, but also profitability, literally operating profit, not just gross margin. And the gross margin profitability is stunning in that I believe that Anthropic is using 75 percent of its computing power for training. That's a cost. And yet it is still profitable. I don't think people understand quite how provocative that is.

38:36Cathie Wood: So, yes, we're we're looking forward to it. And as you know, we have ETFs. We can't say what we are or are not going to do, but stay tuned on that. We think that the productivity and by the way, we got an amazing productivity number yesterday. Unit labor costs annualized down 0.7 percent, productivity up 3.7 percent at an annual rate. This is the beginning of what we have been saying this revolution is all about. And I think the missing link here, if you look at compensation per man hour in that report, it was up on a year over year basis, 4.5 percent. But it was below 3 percent on a quarter to quarter basis.

39:24Cathie Wood: I do believe and I think this is part of where the election is taking us and what the electorate was saying. Hey, wait a minute. What about us? I do believe that labor is going to share in the productivity gains through an acceleration in compensation. As long as it is accompanied with productivity gains, it's not going to be inflationary. This is a win win. All right. I could do a whole nother hour just digging into that comment right there with you, Kathy. Unfortunately, we have to send it back to the studio. Kathy Wood of ARK Invest. It's always great to speak with you. Thank you. Thank you.

40:00And actually, no, I'm not sending it back to studio. I'm sending it to a break. Morning call. We'll be right back.

40:07It's time for your call sheet, where we look at the topics driving the trading day ahead. The crew members today, Ryan Dietrich, Rae-Ann Mitrione, and Dan Ives. Thank you all so much for being here. I mean, what a day yesterday. Today is going to be so critical, and we don't really get a breather because we have the jobs report out at 830. Ryan, let's start with you. Yesterday was a market that you say you were not expecting going into that. What do you think happened, and what are you expecting to happen from here? Well, first of all, thanks for having me back, and good morning to everybody. So just some context around this.

40:44Last seven quarters, our GDP has grown 2.3 % real GDP. So that's pretty good. 40 % of that, that's about 90 basis points, has been AI, AI spending. So all the uncertainty, clearly, and Dan will get more into that. What does it mean to investors? Well, listen, the S &P 500 is still up 8 % for the year. We're right at the 200-day moving average. Yesterday, we saw some extremely high, not surprising, one of the worst days in a long time, extremely high spikes in puts-of-call ratios, different things. So we're going to try to find some type of logical bottom here. The honest answer, with all this uncertainty, just remember this, volatility is the toll we pay to invest.

41:19We say that a lot at Carson. What we're doing quickly, we're still with equities, yes, but we own probably more Europe than any RIA the size of us. We have a lot of low volatility stocks in our portfolios. We have some gold. We have some Bitcoin. We have some diversifiers. So we still think it's a bull market. But to sleep at night, to be diversified is how we're positioning our portfolios. But diversification has become increasingly more difficult. We saw Europe dip on the news after the market sell-off here, not to the magnitude that we saw here. But are you finding it increasingly difficult, especially with these huge gyrations in the market, to actually get that real diversification away from the AI trade, which seems to be the key driver of the upside and the downside, at least over the last few weeks.

42:02Sure. Well, at least until yesterday, it had been. I mean, listen, until yesterday, things were more diversified. Obviously, yesterday, we had like over 1 ,700 stocks sell off on the New York Stock Exchange. That's the most we've seen in well over a year. So in a way, they call it shooting the generals. Now everything is going lower. Again, doesn't mean the lows are here, and I understand all the issues that are still out there, But I think that's one positive to see that everything was sold off yesterday. Maybe get another day or two of that sometime next week. Middle of November, maybe get some type of a tradable low.

42:30And I know it sounds crazy to say this, but one quick one. And I hope people hate this right now with what's going on. But the last 19 times, if you start in November and go out six months in a midterm year, the S &P 500 has been higher. So let's just kind of remember we are still in a seasonal bullish time frame. And I'm fully aware seasonals haven't worked that well. But there are some real positives still out there in our opinion. Yeah. Rayanne, in terms of just the rotation out of tech potentially and into other areas and where you would be kind of looking for opportunity, we did see financials sell off a bit yesterday, although it appeared to be more of the stocks that were capital market sensitive, more sensitive to the build out and the financing of AI.

43:07We're actually sitting down with David Solomon on Monday, who is the chairman and CEO of Goldman Sachs, to talk more about this at their alternatives event, of which private markets have played a key role. But how are you thinking about just yesterday's sell-off? Would you be a buyer of the AI trade or of the everything else? I think it's really both. So, you know, to Ryan's point, you want to have diversification. You want to have the exposure in different areas. So with the panic and the move we saw yesterday, that definitely feels like a buying opportunity because it was such a big move. So for any investors that are under allocated to the AI trade, definitely an opportunity to get in and bring that back up.

43:47Now, we do want to have diversification. We believe in that. We're big believers in that for our client portfolios, both within and across asset classes. So we want to have value allocations. We want to have small cap. We want to have international. and we want to be rebalancing over time as the market gives us opportunities. In terms of getting back into the AI trade, one of the key issues was crowding. It was leverage. I mean, if you read the trading notes, that's kind of what people are attributing some of the recent swings to. For investors that may not have the stomach for that, I mean, is that something that we should prepare to see just these gyrations in the trade in the coming future.

44:29And is that something investors should just be mindful of and something they should be expecting? Yeah, absolutely. I mean, we expect that the AI trade will continue to be a volatile one and that the market will continue to swing on these names around, you know, whatever the news of the day is. So it's really important for investors to have their portfolios aligned with their risk tolerances. And we spend a lot of time talking to clients about that up front to make sure that we have the right targets. Because when the market's going up, everyone has a high risk tolerance. But when you get into these periods is when you really feel how that goes.

44:59And we want to make sure that we're rebalancing. And especially in an environment like now, when yields are elevated, it's a good time to look at that because you can get that same target return now by taking some less risk. So maybe rebalancing some into fixed income now. Yeah. Good reminder, momentum works both ways. Dan, how do you think the setup is for today? We obviously, we're not done with news yet. We get the jobs reported in about two and a half hours. I mean, does it feel like positioning has kind of flushed out to the point where the market can resume its normal fundamental focus?

45:32Dan Ives: I mean, I think this is just irrational selling when it comes to tech, because the reality is that these stocks specifically, like a lot of the semis, hyperscalers that go to the software and some of the other names, they're almost trading like the AI revolution is not happening. And it's the exact opposite. I mean, the trillions that are going to be spent, CapEx is going to peak probably, you know, one, two years earlier. But this will be a golden buying opportunity, especially on the hyperscalers in terms of compute, what we see on terms of the sales like MetaAlphabet. That, in our opinion, is this will be a gut check moment.

46:07Dan Ives: But I view it as, you know, these are the opportunities. Yeah. No, the AI revolution, to your point, a lot of the CapEx commitments are already out there. So it's just a matter of how the market prices them, what the political environment entails, and we'll see how the market trades from here. Guys, thank you so much. Thank you to our morning crew. Morning call crew. Squawk Box starts right now. Snoring, gasping for air during sleep, daytime sleepiness. I'm Shaquille O 'Neal, and this shouldn't be anybody's experience. Ask your doctor about ZepBound towards hepatite, the first and only FDA-approved prescription medicine for moderate to severe obstructive sleep apnea in adults with obesity.

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