Morning Call: NVIDIA Fallout, AI IPOs and Fed Rate Pressure

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1:18Good Friday morning. Let's get a check on U.S. stock futures after a modestly lower day for Wall Street yesterday. Modestly lower being, I think, the headline there, given all of the drama we saw unfold with NVIDIA. You can see right now it's a mixed picture on the screen. The S &P is poised to open up about 11, 12 points. The Dow of 94, the Nasdaq down fractionally by about 30, call it 31 points. Keep in mind, though, we're on pace for gains for all of the major averages for this week. Best weeks for the Dow, the S &P, and the Nasdaq since, call it, mid-August here. The Nasdaq is actually poised as of right now to finish up more than 3 percent.

1:55Let's get a check on the bond market and what we're seeing in treasuries because we have seen a backup in yields this week. And we are going to get October PPI today after a hotter than expected CPI report earlier this week. And a heck of a lot of Fed speak that has tilted hawkish. So take a look. For the most part, we are higher across the curve. Ten-year Treasury yielding 5.1 percent now. So we've seen a significant move there this week. Fed-sensitive two-year Treasury yielding 4.84 percent and the 30-year Treasury yielding 5.45 percent. Let's also get a check on the dollar against other major currencies.

2:29The dollar index is on pace for its best week in two months. Right now we're at 103.17, basically trading unchanged. And let's also get a check on what we're seeing in the energy markets because we've seen a big downdraft in crude oil prices. and right there on your screen, WTI is down about six tenths of 1 % again this morning, continues to trade with an eight handle,$88 a barrel. Brent crude, despite moving a bit higher yesterday, is trading right around$95.50 a barrel. Let's get to a developing story and one that we're watching closely here because it is affecting us like so many other companies.

3:04Shares of Microsoft down two and a half percent pre-market. The global office 365 outage impacting Outlook teams and co-pilot now becoming one of the longest service blackouts in company history. Microsoft says it is, quote, seeing early stabilization and capacity improvements as recovery actions continue. The company does not suspect malicious activity. Instead, Microsoft is saying the incident is tied to some of its servers becoming overwhelmed with traffic, though it is still trying to pinpoint the underlying cause of the increased traffic. We will continue to monitor this story as it develops, though not through our Outlook email here at CNBC.

3:42Let's see how Europe and Asia are shaping up. Karen Cho is in London with the trade there. Happy Friday, Karen.

3:51Happy Friday to you, Morgan. What a week it has been. And Asian equities have largely given up early gains to trade lower as investors continue to rake over the news of Jensen Huang's resignation as NVIDIA's CEO. and the consequences for the company along with the tech ecosystem. Shares in some South Korean stocks declined while in China and Hong Kong. AI-related shares also struggled in session. Here in Europe, the benchmark stock 600 is set for its biggest weekly gain in over four months. We've had records dotted across the boards on earnings this week. The DAX yesterday, intraday at a record high.

4:24The Friday trade, though, has given away to much more muted activity, although we are climbing off the lows on the boards we had mostly red at the start. And as you can see, modest green territory at this hour. Traders are closely watching that Microsoft story as the company races to fix its global outage, which has impacted access to key products, Outlook and Teams. I would argue that's a lifeline for some more. And I keep on opening my inbox and expecting it to magically refresh, but it's simply not happening at this hour. Yeah, wishing you luck on that. Karen Cho, have a good weekend. Let's turn to some of the mornings.

4:57Big stock movers and the AI trade looking to get a boost this morning despite the onslaught of headlines around Nvidia. Let's start with Anthropik's IPO. About six times oversubscribed, that is according to Bloomberg, reporting that bankers have told prospective investors the company will prioritize its current backers, which will leave new buyers with a smaller allocation than expected. Anthropik hasn't commented. The IPO is expected to price on Wednesday, begins trading next Thursday. Let's also get a check on shares of Cerebris. Those are jumping as the chip and cloud company reported a surprise third quarter adjusted profit.

5:31Revenue beat estimates. The company also raising its sales guidance for the year, says it signed Microsoft as a customer with details to be shared next year. Those shares are up, oh, it looks like 16 and a half percent right now. Don't miss an interview with Cerebus founder and CEO later today at 11 a.m. Eastern. Call it an AI earnings trifecta here. We've got more to bring you. Applied Materials fourth quarter results topping forecasts fueled by AI-driven demand for chip services. AMAT's CEO says the company is on track to grow that business by more than 40 percent this calendar year. Shares are trading, though, about flat here.

6:07And Cisco's first quarter profit and revenue breezing past estimates. The company is lifting its outlook for the rest of the year with orders from big cloud providers helping to drive growth. Cisco expects AI infrastructure revenue from hyperscalers to more than double in fiscal 2027 to$9 billion. You can check out a first on CNBC interview with Cisco CEO Chuck Robbins this morning at 9 a.m. Eastern. Those shares are down about 2 % here pre-market, but it is, up until this point, the best performing stock in the Dow week to date. So maybe a little profit taking happening here. The market's capping off a turbulent week dominated by the scandal at NVIDIA.

6:43In a blow to the AI boom, he helped advance. NVIDIA is down about 10%, about 11 % so far this week, on track for a sixth straight weekly decline as the longest losing streak since 2012. You can see this morning bouncing back a little bit, up 2 % pre-market. But even with that, the major averages are heading up for solid gains. The Dow is up 2%. The S &P right now up 3%. And the NASDAQ up more than 3 % ahead of this final day of trading. Best week for all three since August. Joining me now, Michael O 'Rourke, Chief Market Strategist at Jones Trading. Great to have you here on set. What a week. What a week we had.

7:21You know, NVIDIA, just to be clear, NVIDIA's down 11 % so far this week. It's down something like 27 % over the past month. The fact that it only lost 4%, though, in trading yesterday with all the headlines, it basically bounced off the trading lows. I mean, is that a positive sign when you see the NASDAQ on pace for gains this week? I think in the case of NVIDIA, what we saw happen here was a lot of people were seeing Jensen's exit as maybe a potential clearing event for the stock. A lot of people were waiting for that to buy the stock, and that's what we saw. The stock opened around 150, which was down 14%, rallied 12%.

7:57And I think anyone who wanted to buy NVIDIA probably bought it yesterday. But I'm not sure that that paints a proper outlook for where we're going. Just as you said, it's only down about 10 % or 11 % for the week. Is a NVIDIA without Jensen Wang worth as much, you know, is a 10 percent discount, 11 percent discount enough for investors? I don't think so, because obviously the whole complexion of the company is going to change going forward here. Yeah, I mean, in light of that, you saw an article from The Wall Street Journal last night about Colette Crest, the CFO who is now the interim CEO at NVIDIA.

8:34And it would seem, based on the reporting in that article, that she has been one of those people in the company that's been pushing back on some of the financing deals that Jensen Wang had been doing at NVIDIA. I wonder whether it raises questions going into earnings next week and the possibility that we see an unwind of some of the backstop central bank. NVIDIA is the central bank of AI dynamic that's been playing out for a while. It's funny. There's two terms often tied to NVIDIA and Jensen Wang. Central Bank of NVIDIA and the hype man for the AI trade. And that's a problem. Those are two terms that should not go together.

9:09That Wall Street Journal story this morning talked about an August meeting where Jensen Wang was worried about the avalanche of memory. All we've heard for six months is how there's a memory shortage and that his cloud service provider customers, the hyperscalers, were running away from him. So that is a big deal, this story this morning. And the interesting thing is that meeting, according to the journal, happened in August. NVIDIA's earnings were August 25th, I believe. On the conference call, Colette Kress guided 2028 revenues up 70 % next year. Jensen said they would be up 100 % without capacity constraints, so supply constraints.

9:45So privately, the company's saying one thing. Publicly, they guided somewhere else. So when Colette Kress is on the conference call next week, she has to address that 2028 guidance of 70 % revenue growth. that would put revenues at about$700 billion. So this is a big deal, and it should be a big story today. So you think earnings and what comes out of earnings is very much in play? We should not write that off. We should pay attention. How do you stack that up against an Anthropic IPO next week, too? Oh, Anthropic, I love Claude. He's incredible. The interesting thing about, obviously, the report about the IPO being oversubscribed, I think SpaceX, which is a comparable listing, was about three to four times oversubscribed, and I'm sure had a massive retail element to that.

10:29So that just shows the institutional demand for Anthropic. Again, the really interesting thing about the AI world is there's enough data out there that you can start modeling the revenues these companies are doing. And it looks like Anthropic is on pace to do about 90 billion ARR revenue, you know, 90 billion ARR for the end of the year. Although they did launch new models, they need to see acceleration pickup of those models to drive that their spend capture, whereas they saw a little competition from OpenAI when they launched on Astra in September, and that dented Anthropics business a little bit.

11:04So they need to see an acceleration here, but it's going to be an incredible IPO. It's going to be incredible for the market. I can't wait for it to happen. All right. Intelligence to help analyze intelligence. All right. Another big week on tap ahead. Michael Rourke, thanks for kicking off the hour with me. Thanks for having me. Great to have you here. Well, we got a lot more to come here on Morning Call, including blast off for one stock that's up nearly 20 percent this week following its latest earnings report and ahead of a key milestone, a rocket launch tomorrow. We've got the CEO of Rocket Lab joining next.

11:35Plus, a Senate leadership challenge after the Democrats' midterm blue wave. And later, much more on the NVIDIA fallout. trade and national security concerns front and center, as is the future of one top-ranking White House official. We've got a very busy hour still ahead when Morning Call returns. With the Discovered Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants.

12:13It pays to Discover. Terms apply. See discover.com slash 5 for details. Hmm. Interesting. Something amazing is happening when teams brainstorm ideas. Devices are keeping the energy flowing. That's because CDW is building modern workplaces with Acer devices. Built-in security, uncompromising processing power, and fast connectivity help fuel collaboration so your team can innovate quickly. Wait, guys, that's a great idea. Acer and CDW make amazing happen. Learn more at cdw.com slash Acer. Your sausage McMuffin with egg didn't change. Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just$5.

13:00Only at McDonald's for a limited time. Price and participation may vary. Promotion pricing may be lower than meal pricing. Welcome back to Morning Call. We're watching shares of Rocket Lab. Over 20 percent this week after reporting Q3 results on Monday. Missing on earnings but topping expectations on revenue. The company is preparing to launch a milestone as well, literally, the 100th Electron rocket launch tomorrow. For more, let's bring in Rocket Lab CEO and founder Sir Peter Beck. Peter, it's great to have you back on the show. Welcome to you. Record revenue for the quarter. Record backlog, which is up more than 50 percent consecutively here, too.

13:36I guess just the state of Rocket Lab, the state of the industry right now, which does seem to be, I'm going to use the pun, to the moon. Yeah. Oh, it's great to talk to you again, Morgan. Yeah, no, it's a great quarter. And, you know, we booked nearly just slightly over, in fact, a billion dollars worth of launch in this quarter alone. So, you know, launch continues to grow and also all our space systems business. And, you know, as you pointed out, it's been a great quarter for us. A hundredth launch of your Electron rocket. That is a very small and elite club of vehicles that have done triple digit launches here.

14:16How significant is that and how does it speak to a new era that's being ushered in? Because you're going to bring Neutron online, your bigger, more powerful rocket next year. And you're already seeing very strong demand for that. yeah no i mean 100 launches is is uh you know is a great milestone as you point out and um you know it's uh you know 90 96 reliability for the vehicle so that's the sort of number you want uh and uh but i guess one of the things that the team's really proud of is that uh you know we're the fastest uh commercially developed rocket to to ever get to 100 launches so um uh you know we're able to to get there but also get there in uh in record time and as you point out, you know, Neutron is coming online here shortly.

15:00So, you know, that will be the, you know, the next vehicle on the stable for medium class lift. You and I've had this conversation before, but I've had it with a number of other companies and executives, including Blue Origin at Upsummit last week as well. And that is the fact that demand is outpacing capacity when it comes to launch services. How quickly can you bring Neutron online and then ramp that cadence, especially with now a Pentagon debt deal under your belts, I believe, as of this week, too. And what does that mean for pricing? Yeah, exactly right. I mean, well, that is the multi-billion dollar question.

15:37And, you know, the first rocket to fly is obviously very, very important. But I think, you know, the question that I would expect people to ask me is like, what about the 10th? Because, you know, the speed in which you can scale them, as you point out, is super important. And, you know, if you look at the speed we scaled Electron, as we talked about before, we did it, you know, faster than anybody else in history. So we hopefully to, you know, hope to apply that to Neutron as well. And, yeah, I mean, launch has always been pent up. And, you know, we knew that for the medium lift class, of course, that was going to be the same.

16:15So, you know, it's great to bring a product to market that, you know, when there's such demand. And, you know, we basically sold out until 2030 at prices, you know, the original list price was 55 million. You know, they're selling in excess of 70 million now before it's even flown. So, you know, I think that speaks volumes to the, you know, the community's trust in this that we can bring that vehicle to market and scale it quickly. Yeah. And you also have a satellite and spacecraft manufacturing business. you're getting ready to, I think, soon here, close on your Iridium deal, too, which brings you into space services and communications as well.

16:54One of the things I've been hearing, I've been on the conference circuit, and one of the things I've been hearing at a number of different conferences is how great the opportunity is right now to invest in and do business in places like Europe, which are looking for more homegrown industries, more homegrown companies, but also just more competition versus the likes of SpaceX. So how are you assessing that? What does that mean for Rocket Lab? Yeah, well, look, we've been a global company since day one. So, you know, moving into different continents certainly doesn't bother us. And, you know, this year we've acquired a German company called Benarik and also opened Rocket Lab Europe.

17:37So, you know, we're taking all of our knowledge and experience, you know, into those other markets. And, you know, to your point, the next biggest market after the US market is the European market. And there's great desire and a huge amount of resources and capital flying right now to build those sovereign capabilities. So, we think we're very well placed to lend a helping hand in doing that. I realize that you're not necessarily partnered up with or counts NVIDIA as an investor in your company, but they have done a lot. And under now former CEO Jensen Wong, have done a lot to invest in and sort of seed this new space economy and worked with a lot of space startups.

18:21The fact that you are seeing leadership change there, a shakeup happen there, how do you expect that to ripple out into some of the other technologies above and beyond AI, including space? Yeah, it's an interesting question. I haven't really thought about it that much. But I mean, look, the vast, our market is pretty much, or our customer base is pretty much broken into 50 % government and 50 % commercial. And while it's true, I'm sure a number of those technologies sort of flying into some of those spacecraft and missions, I don't see it as a huge, you know, huge impact for us. But I think, you know, everybody wants an extremely buoyant stock market.

19:04And so we seem to get affected in the highs and the lows of any volatility. So that's probably the bigger effect to us is probably second order rather than first order. Yeah. Peter Beck of Rocket Lab, it's great to have you on, as always. We'll be watching this Electron launch tomorrow. Thank you. Straight ahead. An NVIDIA-backed NeoCloud player updating investors ahead of its high-profile IPO. Morning call. We'll be right back. With the Discover Cashback card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases.

19:49That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash five for details. Hmm. Interesting. Something amazing is happening when teams brainstorm ideas. Devices are keeping the energy flowing. That's because CDW is building modern workplaces with Acer devices. Built-in security, uncompromising processing power, and fast connectivity help fuel collaboration so your team can innovate quickly. Wait, guys, that's a great idea. Acer and CDW make amazing happen. Learn more at cdw.com slash Acer. Your sausage McMuffin with egg didn't change.

20:35Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just$5. Only at McDonald's for a limited time. Price and participation may vary. Promotion pricing may be lower than meal pricing. Welcome back. We're checking some of the morning's latest headlines. New York Fed President John Williams says the central bank has, quote, worked to do to get inflation back to its 2 % goal. Williams adding that more interest rate increases are likely, but would not say when he expects the Fed to raise rates again or how far it will go with those increases.

21:08We'll hear more on the central bank's rate strategy when Chicago Fed President Austin Goolsbee joins Glockbox at 8.30 a.m. Eastern. And a week of Fed speak. Members of the Trump administration's AI task force to discuss how to tackle AI-powered cyber attacks. This is according to Reuters, which says the leaders talked about ways to encourage critical U.S. sectors, including infrastructure, to report the attacks. The White House is facing growing pressure to address the risk of AI agents carrying out unauthorized hacks. And N-Scale has updated its IPO prospectus, showing widening losses. In an updated prospectus, the NVIDIA-backed NeoCloud player showing a third-quarter net loss of just under$1.7 billion on revenue of just over$305 million.

21:52That's up 1 ,300 percent from a year ago. Also, a bigger loss than in the previous quarter. And Democratic Senator Chris Van Hollen has announced he is throwing his hat in the ring to be Senate Majority Leader in a challenge to Senator Chuck Schumer for the role. Van Hollen arguing that on the back of the midterms, voters called for, quote, a change from the status quo that isn't working for the working people. Schumer pushing back, saying he had the votes to continue serving as the Democratic leader in the Senate. Still on deck, we've got more on the fallout around NVIDIA. There are growing questions around China, chip controls, what it all means for the race between Washington and Beijing for AI dominance.

22:32Something I talked about with Shields Capital founder and managing partner Raj Shah earlier this week. I think economic and national security are absolutely intertwined. And I think this recent case, I know not much about the case itself, shows that our adversaries will go to no length to try to get a technology advantage. And so this is a hold of nation effort. I'm Morgan Braden. Welcome back to Morning Call this Friday morning. Let's get a check on U.S. stock futures. After a modestly lower day for Wall Street yesterday, you can see it's a mixed picture on the screen right now. The Dow is poised to open up 112 points.

23:11The S &P up 15. The Nasdaq basically just below the flat line down about six points. Major averages are heading for solid gains for the week, though. The Dow is up 2 % ahead of this final day of trading. The S &P up 3%. The Nasdaq more than 3%. It's the best week for all three since early August. And that is despite everything we've seen play out with NVIDIA. That is, well, we'll get to that stock in a moment. But another stock to watch, another hyperscaler to watch is Microsoft. The global office 365 outage impacting Outlook teams and CoPilot. It's now becoming one of the longest service blackouts in company history.

23:47Microsoft says it is, quote, seeing early stabilization and capacity improvements as recovery actions continue. The company does not suspect malicious activity. Those shares are down 2 percent this morning. And I suspect I know this is the case for this company, that there's still a lot of folks that can't access their e-mails. Maybe the weekend starts early. We'll see. Meantime, take a look at the Treasury market ahead of October PPI today. And after a hotter than expected CPI report earlier this week, that has been the other big story. This week has been the run-up, the re-run-up in rates. And you can see this morning we're largely higher across the curve.

24:21U.S. 10-year Treasury yielding 5.1 percent now. Fed-sensitive two-year Treasury, 4.84 percent. And the 30-year U.S. Treasury is yielding 5.45 percent. Similar situation for the dollar. It's on pace. The dollar index is on pace for its best week in two months. 103.22 is the level there. We've seen a lot of Fed speak that's tilted more hawkish in the wake of some of this hotter than expected inflation data and a market that is pricing in very strongly in expectation for another rate hike come December. Let's see what's happening in energy, too, because crude prices are lower on the week, both for WTI and Brent.

24:58And you can see under pressure again this morning with WTI down about 1 percent, trading right around just below$88 a barrel and Brent crude down as well, trading around$95 a barrel. Let's turn to global markets, a mixed finish to the week in Asia. We're checking early trading in Europe, too. And as you can see, Japan's Nikkei finishing up about half a percent. The cost be down about one percent. And again, we see green on the screen here in early trading for the major indexes in Europe, which in general have been faring very well, despite what we've seen with the AI and tech trade overall in recent days and recent weeks.

25:35Let's turn back to NVIDIA. The stock on pace for its longest weekly losing streak since 2012, as of yesterday's close, is now heading for six down weeks in a row amid reports of a third case of Jensen Huang infidelity and new revelations around Alice Huang, the purported Chinese spy, and her ties to NVIDIA's biggest Chinese chip competitor, Huawei. Now, in Washington, Huang, Jensen Huang, is now facing requests to appear before House and Senate lawmakers with proposed dates this month and early next month. Also hearing from House Speaker Mike Johnson saying there is growing support in Congress to limit AI chip exports to China in the wake of the scandal and Huang's exit.

26:16OpenAI also reportedly backing that bipartisan push for new chip limits after months of internal debate. Pressure also building around Commerce Secretary Howard Lutnick and his policy stance on NVIDIA chip exports to China. Senior White House officials reportedly considering whether or not he should be pushed out as a growing number of lawmakers call out his refusal to add dozens of Chinese companies to a key U.S. blacklist and whether the government was properly overseeing NVIDIA's business dealings with China and entities affiliated with China. Joining me now to discuss is Duardrick McNeil, senior policy analyst at Longview Global.

26:51He's also a CNBC contributor and out with an editorial on CNBC.com this week, saying there's plenty of blame to go around amid the NVIDIA spying scandal. Also with us from Washington is Nova Daly, senior advisor at Wiley Rain, and a former White House Treasury National Security Council and Commerce Department official. It's great to have both of you here. Dwarjik, I'm going to kick this off with you, and that is just generally your reaction to everything we're seeing and what this is going to mean in terms of greater regulation, perhaps, when it comes to things like chip exports.

27:32We think we're going to see greater regulation. I think we have a package of laws that I speak about in the op-ed that seeks to close some of those gaps. My fear, Morgan, is that it could be rushing to close the back door after the burglar has already entered your home. But let me just speak quickly, if I can, about the fact that I think what we're facing here is a challenge where there's such a myopic view about China for many companies looking at China purely as a market and missing the national security imperative and perspectives around China. Silicon Valley has been historically dismissive, and that has made them a softer target, Morgan, than industries that may have a healthy doubt and caution with respect to national security in China.

28:24Nova, there seems to be some questions being raised about whether Alice Wong is actually, in fact, a Chinese spy. Regardless, whether or not that's the case, this all seems to have started with what has essentially been described to me as one person who was involved in the initial investigation around Megaspeed at Commerce kicking off, was basically an empty storefront in Singapore that has now ushered billions of dollars, it would seem, allegedly, worth of chips into other parts of the region, most notably China. And it would seem, based including on some of our own reporting at CNBC, to the likes of Huawei and others.

29:03How much can new regulations actually stem the flow? What does that mean with an active investigation going on in commerce right now in terms of, I guess, sorting through who's at fault, who's to blame, whether balls were dropped here. There's so much we still don't know. It feels like more questions than answers. Yeah. No, no, I agree. And it's very difficult to be able to know, especially from our perspective, where the faults happen and how they happened. The point is that diligence has to be applied. Oversight has to be applied. This is where the government, and I've seen it in many instances, takes a look at what its policies have been and how it's applied them and then puts resources into it.

29:49And it's really just a matter of where we want to go in terms of our broader policy. There was strong controls on semiconductors on the Biden administration. They were loosened to a degree under the Trump administration. The reason was to ensure that we had innovation happening here in the United States and that we were competing with the likes of Huawei globally with the stacking of AI. So it's a tough balance. Sometimes you hit some bumps, but you have to apply the resources and the diligence to figure out how to make the right next steps. And we talk about it geopolitically, Dwarjik, as an AI arms race.

30:26as we get more details here around all of this. How much does this potentially close the gap between the U.S. and China when it comes to AI capabilities and this type of technology? I ask that because just before the break, we played a soundbite from Shield Capital's Raj Shah. I mean, it's not just an economic dynamic. We have AI in real time, literally right now, being used on battlefields in active conflicts. Yeah, very good point, Morgan. And look, I think we have seen since the Deep Seek revelation back in January 2025, that gap, that delta between our capability and the Chinese capability on AI really, really closing fast.

31:05Now, we think some of this is because of diffusion and likely some of this stuff that we're talking about now with respect to access to high-end chips. But I think it's important here, Morgan, to step back and remember what Xi Jinping has stated their goal is. And their goal is not to get addicted to U.S. chips. Their goal was to use as much of this period to bridge the gap by using U.S. technology. And this is why I've consistently said the NVIDIA press to continue to stay in China never made sense to me as a market issue because that is a shrinking market. It was not going to remain for much longer.

31:46because Xi is not interested. Although Chinese companies may be, Xi Jinping is not interested in getting addicted to Chinese chips. Now that we have congressional hearings that it would appear are going to be scheduled, Nova, before the end of this year, both with closed-door testimony anticipated from NVIDIA's former CEO, Jensen Wang, and also from Commerce Secretary Howard Lutnick, how does this potentially open the door to more major oversight and investigations with a new Congress coming in in January. How long do these types of investigations and processes usually take? Yeah, it really depends on the extent of Congress and wanting to apply new policy and new law.

32:28So we'll see how long it goes on. I think the focus should be really how does America ensure that we remain competitive and we're the most innovative place to build and to create innovation. And so, you know, I think as part of these hearings and oversight, it's really what it should go abroad, how it should go abroad. But the point is, we need to strengthen our capabilities to be the best place to innovate in the world. Duarjic, how does this set up possible U.S.-China trade talks next week at APEC? Yeah, look, this is a very good question. I would like to see this issue really rise to the top of the agenda.

33:12President Trump will be at APEC in Shenzhen. This should be raised. And I don't want us to believe that because of the critical minerals gap, the chokehold, that we can't say anything. We can't set red lines and make it clear to China not to cross those red lines. And I feel like our policy has been hijacked because of fear over critical minerals. And so we're allowing all sorts of red lines to be crossed that when I was serving in government, I just couldn't imagine we wouldn't raise this at the highest levels of concern, Morgan. Nova, I see you nodding your head. So I want to get your thoughts on that.

33:49But I'm also going to ask you one more question here. And that is we have a lot of reporting here. There's a lot. Again, we still don't know. But if the Commerce Secretary was slow walking the president's implement implementations around some of these chip restrictions, is this a situation where a cabinet official can survive investigations? allegations? Yeah, well, you know, I mean, the tricky part is and having served at the White House, you know, what you see is reporting versus what actually happened and what conversations were had between the secretary and the president in terms of the application of the law.

34:25We just we just don't know. So, I mean, I really it's hard to opine until you have all the facts until you're in the room. So. All right. It's a good question. Yeah. More questions and answers right now, but we'll continue to dig through all of this. And to your point, we have a number of pieces of legislation in Congress that maybe perhaps are going to move. So we'll track that as well. Thank you to Nova Daly and Dwardrick McNeil. Appreciate it. We're going to hear much more on the fallout around the NVIDIA scandal once Glockbox speaks with Treasury Secretary Scott Bessent. That is it at 8 a.m.

35:01Eastern. A lot. Speaking of questions and answers, a lot to get to there. We have a lot to get to here, too, on Morning Call still, including fresh analyst calls. There's one on an NVIDIA competitor that's sending shares of that stock lower. Morning Call. We'll be right back. Welcome back. Wall Street is pointed towards a mixed open following a negative session yesterday with, this is definitely not the right script, I don't think, dragged down by NVIDIA. That's following the exit of CEO Jensen Wong. That stock finished down 4 % yesterday. It's bouncing back this morning. It's up about 2 % pre-market.

35:37We got some fresh analyst calls, though. Rothschild downgrading Broadcom's rating to neutral, citing near-term hurdles, including questions around earnings. KeyBank upgrading Palo Alto's rating to overweight, setting the recent pullback in the stock and a strong budget outlook. And Stiefel downgrading Lowe's rating to sell, also cutting its price target ahead of its earnings next week, citing risks to the housing and home improvement sectors. You can see that stock, Lowe's, is down about 1.5%. Straight ahead, though, the Morning Call crew teeing up the trading day ahead as markets turn the page on a landmark week with the action only set to ramp up in the coming days.

36:15We're back in a moment. Welcome back. Let's get to check on some of the stocks that are tied to NVIDIA, a number of them counting NVIDIA as a key backer, including Synopsys, Coherent, Lumentum. Those stocks all fell yesterday in trading, and we've got some others on the screen. You can see they're under pressure again this morning. Intel, another one, Marvell as well. And on the flip side, beneficiaries like AMD and Alphabet popped yesterday. So we'll continue to track that, too. Another name to watch in the midst of all of this, though, is SpaceX. SpaceX counts NVIDIA as a major investor, an investment that's worth, depending on the day and where the stock is trading, call it$20 billion, give or take.

36:57They also have an exclusive chip supply agreement with NVIDIA. But the other thing to watch with SpaceX here is going to be after the close today, starting at 545 Eastern time when the launch window for the next Starship flight opens up. And they are planning to catch, attempt to catch both the ship and the booster, which if that happens, it'll be the first time not only for SpaceX and for Starship that we've seen that happen, but for anything when it comes to rocket science and the history of space flight. So a Major milestone to watch. In the meantime, it is time for your call sheet. And the crew members today, Jay Woods of Freedom Capital Markets, Chris Hodge of the Texas CIB Americas, and James Pethokoukas of the American Enterprise Institute.

37:38Jay and Jimmy are also CNBC contributors. All right. I mean, this is really the week that was and the week that's coming. Because I got to tell you, Jay, I thought this week was going to be relatively quiet. And then we got an NVIDIA, as I slide around on my chair, an NVIDIA alleged spy scandal. You put an interesting stat out this morning about when NVIDIA joined the S &P. I guess just how do you see how do you see all this right now, especially since NVIDIA is so much cheaper than the S &P after this downdraft? Yeah, that little fun fact was on November 28, 2001, 25 years ago in a couple of weeks.

38:11Enron was replaced in the S &P 500 by NVIDIA. And now, 25 years later, we've got all these clouds around NVIDIA. But what I'm watching for, I think the worst, the washout for now is over. We have a floor, so I go put my technician's hat on. We had that washout to 150 yesterday and a nice relief rally. We're waiting to see not earnings earnings. We know it's it's going to be clouded by what's the succession plan, what's next. So we've got to wait till that next announcement comes with the CEO. So I think if someone wants to trade this stock, we may get another 10 to 15 points of upside out of this.

38:48But the long term shareholder, which I still am, I am watching this very closely because I want to see the succession plan who comes in next, because there are way too many questions in the spy scandal is not going to go away. And if this does have legs, then it may be time for us to move on to from the video and focus on the AMD's, the broad comms and the alphabets of the world. Yeah, Jimmy, I mean, certainly not going away in Washington is just getting started. Absolutely. Listen, even before this, there was no doubt that under this new Congress, there was going to be a much tougher stance on AI broadly.

39:25There'd be a lot more bringing CEOs to Capitol Hill. And this is just, I think, wildly accelerated that. There's various bills currently floating around Capitol Hill, which I think have gotten a lot of momentum, whether that's giving Congress more veto power over advanced chipped exports, you know, helping, you know, these sort of location devices to help stop smuggling and some other things. So, yeah, I don't know. Listen, I don't know if the export restrictions are going to toughen up right away, but there's gonna be a lot of investigations, a lot of testimony. And listen, NVIDIA was the sort of the biggest, like, you know, you know, sort of pro export, pro light regulation force on Capitol Hill.

40:11So the China hawks and the A.I. hawks, it's a good day for them. Chris, I do want to get your thoughts about what this is going to mean potentially in NVIDIA, too. And I saw the Wall Street Journal article overnight about Colette Kress, CFO, who's now the interim CEO. And it talked about the fact that she has scrutinized or even, you know, debt deals backstopping that NVIDIA had done under Jensen Wong as well. We've called it the central bank of AI. We know AI in general is a key part of the economy here. If you see any sort of shift or pivot in terms of that strategy, what ripple effects could be involved with that?

40:53Yeah, you're absolutely right to note the importance of AI and the data center build out for not just markets, but for the economy overall. I mean, by my calculations, you have items that are related to the AI build-out accounting for about 130 % of private domestic investment over the past couple of years, which means everything else pretty much went down. And a lot of consumer demand comes from the wealth created from that as well. So this has really significant implications for the outlook for the economy and ultimately what the Fed is going to do also. Meantime, Anthropik IPO next week. Yeah, that's what we're going to be talking about.

41:37We want to see how that reacts. This is the biggest thing to come to the market. When I will look at that, I will judge it based on how SpaceX performed. I think there are a lot of similarities. And this is the former market maker me talking how it's received. and then we'll find out more about that lockup as we go forward because that's what we'll talk about. But this has been exciting and this is kind of what the market needed. The other side of the equation we'll focus on next week is inflation. We get that PPI data at 830 and then we get a lot of retailers reporting next week. So the Walmarts, the Targets, the Home Depots of the world, that'll give us a better indication of how the consumer is.

42:14And then we have this war in Iran that we're kind of forgetting about. But oil is finally stabilized, found a floor starting rally. I still like these energy names. ConocoPhillips being my top pick in that sector. So a lot to worry about. But, yes, Anthropos is exciting. NVIDIA earnings. Just bring your popcorn. It's going to be a fun week. Yeah. And, oh, also APEC next week, too, where we're expecting potential U.S.-China talks as well. I actually do want to go back to what we're seeing with oil, Jimmy, because we did have, you know, the comments from President Trump yesterday about not needing to do a deal with Iran and then Vice President Vance reportedly being pulled off of those talks.

42:54Yes, crude prices are down right now. But I mean, is this really sort of a reflection of gridlock in the Middle East and with some of these conflicts as we do look at what's happening with inflation? Yeah, you know, so the classic piece of analysis is that when you have a president, particularly in a second term, particularly in the last part of his second term, he's going to face a hostile Congress, tough to do anything domestically, though this president likes to use executive orders. And the one place where they can do a lot and cement their legacy is foreign policy. Now, I don't know what that means to this president.

43:33I don't know if that means getting a necessarily getting a peace deal with Iran. I don't know if that means, you know, trying to eliminate Iran's sort of, you know, missile and nuclear capabilities. But, you know, clearly that is going to be something that currently is something the president is thinking about. And the fact that he pulled probably one of the bigger doves in the administration, the vice president, off the sort of off the case, I think is telling. But like, I don't think this issue is going away. And I'm just not sure how the president will ultimately define how he views legacy, particularly with Iran.

44:09Yeah. Jay just mentioned it, Chris, but PPI reading this morning, we had a hotter than expected CPI as well. We know this conflict as well as AI build-out have been contributing to the inflationary environment here. This has been the other big story this week has been the run-up in rates and Fed speak that has been tilting increasingly hawkish. Yeah, I think the run-up in rates is probably a little bit overdone. As far as PPI today is concerned, we're expecting a print about in line with consensus, which would be an improvement from the prior month, but still unacceptably high from the Fed. You had Governor Waller float the possibility of a hike of 50 at the December meeting.

44:49We still think that the preferred path for the Fed is incrementalism and gradualism. That's been echoed by Logan from Dallas and Hammock from Cleveland and Williams and Waller as well, or Williams and Jefferson as well. So I think, you know, broadly speaking, I think Waller is probably speaking on his own about going 50. And we do think that the path is going to be higher rates for sure. But we think, you know, Three, four rates or rate hikes being priced in right now is probably overdone. We think two will probably be enough for the Fed. OK. And just to bring this full circle back to your point, Jay, I mean, the best performing sector in the S &P this week is energy stocks.

45:31It speaks to how broad-based the moves have been with all the major averages having their best week since, at least so far, since early August. I also just have to stop and say thank you to our call crew. I just have to stop and say a big thank you to Rich Carolyn, our executive producer, and my partner in crime in standing up and launching Morning Call this year. This is his final day with us. He is on to another project that I'm sure you'll hear more about, but it has been an honor and a privilege to work with you, Rich. Thank you. When you partner with CDW, you get more from technology with AI-powered devices that turn complexity into clarity.

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