NVIDIA, AI Volatility, Fed Rates and Defense Tech on Veterans Day

0:00At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters. So you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones, member SIPC. Pro safe big with early Black Friday deals at Lowe's. Shop new select DeWalt 20-volt max nailers under$350 for a limited time, like the 18-gauge Brad nailer.

0:43Now just$269. Plus, get up to 50 % off select ladders. With deals like these, it's easy to keep your jobs moving all season long. Get Black Friday deals early at Lowe's, in-store and online. Valid through 1118, while supplies last. Selection varies by location. I'm Dominic Chiu and this is your Morning Call.

1:17Good Wednesday morning and welcome to Morning Call. I'm Dominic Chiu in for Morgan Brennan, who is, by the way, in Washington, D.C. this morning at Shield Capital's Veterans Day Mission Matters Summit. That's where we see her right now. Morgan, what do you have on tap?

1:32Morgan Brennan: That's right, Dom. It's so good to see you. It's another day, another day of special coverage. We're here in Washington, D.C. First, we're going to bring you some of my exclusive interview with Suzanne Clark, the CEO of the U.S. Chamber of Commerce. This, as the B20 Summit continues here in Washington, and then it's Veterans Day here in the U.S. It's Remembrance Day in other parts of the world as well. And we are marking the moment with dedicated discussions to matters of defense and national security and deterrence and how best, excuse me, to support our warfighters. So I am here at Shield Capital's Veterans Day Mission Matters Summit.

2:11Morgan Brennan: I'm going to be joined by a very special guest a little bit later this hour. First broadcast interview ever, the new CEO of defense contractor L3 Harris. So we're going to bring you that too. And then And tomorrow we're going to continue the coverage with Raj Shah, who is the founder and managing partner of Shields Capital as well. And so I'll probably say it one more time before this hour is out. But, Dom, just want to acknowledge and thank all of our current and retired service members for all of their service and all that they do to ensure our freedoms here in the U.S. and in other parts of the world.

2:45Absolutely. Very well said, Morgan. We are going to see you later on this hour, of course, with those great interviews. And of course, thank you for all the service members out there, current and former, for our safety here in the United States. Morgan, we'll see you later on this hour. Let's now turn to what's happening with the markets overall and equity futures, which are after, I guess, mostly higher. You can see here after a mostly lower day for stocks yesterday, following that hotter than expected inflation read. Right now, the Dow's implied higher by a modest 30 points, so pretty much flat.

3:14The S &P's, though, up by about 59 points, decent move higher. And that tech-heavier NASDAQ trade trying to really bounce back up about 477 points. We'll get to the reason why in just a moment here. Now, because of the Veterans Day holiday here, bond markets are closed. But here's where yields closed in the yesterday session. You can see here they ticked just to about, I mean, maybe fortuitously, right on the 5.00 mark, the big figure, 5, for that benchmark 10-year note yield. The two-year note yield ticking higher to 4.748 percent and the 30-year long bond 5.358 percent. Again, yesterday's close because bond markets are not open for the Veterans Day holiday here in the U.S.

4:00And then energy prices as retail gasoline prices continue to fall lower. Now below$4 per gallon for regular unleaded. You can see U.S. benchmark West Texas Intermediate$86.84, up about 1 percent today. Ice Brent crude futures the world gaged$92.97, up about 1.5%. Now let's see how Europe and Asia are shaping up. Ian King is out in London with the trade out there across the pond. Ian, I'll send things over to you.

4:30Good morning, Dom. Yes, Asian equities have largely defied overnight weakness on Wall Street. Japan's Nikkei 225 rose by nearly 1.5%, while the South Korean Kospi also gained. But NVIDIA remains at the centre of investor focus as new reports add to questions about Jensen Wang's relationship with Alice Wang. Meanwhile, here in Europe, the pan-European Stock 600 is trading near record levels, last hit in August. Strong forecasts from Siemens Energy and US-based Corweave have helped ease concerns about the AI outlook. We're also closely watching moves in the global bond market. yields rose after U.S.

5:06CPI jumped more than expected last month, but all but cementing bets that the Federal Reserve will raise rates at its December meeting. Dom, back to you. All right. Thank you very much, Ian King, for the latest there on the market update around the world. Now, let's turn back towards the tech trade. NVIDIA and Jensen Huang and the spy drama. We're watching shares this morning after the chipmaker shed more than$400 billion in market value just over the past two sessions alone. Right now, that trade is up four and a half percent, trying to bounce back. The stock briefly, by the way, trading on top of Microsoft's market cap for the first time since June of 2025, as new reports add to questions around Huang's relationship with the alleged Chinese spy and who at NVIDIA and at the White House knew what and when.

5:53Timeline questions, market cap gyrations all in focus right now. Among the latest developments this morning, Senate Democratic leader Chuck Schumer is now calling for answers from the administration and tighter restrictions on chip exports to China. This as NVIDIA taps law firm Wachtell Lipton to investigate allegations around Huang, with former acting U.S. attorney Jun Kim leading that independent inquiry there. We're also hearing from Republican Senator Kevin Kramer on the Senate Banking Committee. He's calling on Huang to step down as CEO, telling Politico, quote, the potential for extortion is so tremendous that something as sensitive as NVIDIA chips, I just think he's got to go.

6:40And then Reuters reporting this morning, a Chinese university with deep ties to the People's Liberation Army bought NVIDIA's powerful H200 chips last month, despite being on a U.S. export blacklist, highlighting gaps in Washington's efforts to curb China's access to these critically important chips. So sticking with that tech trade. Outside of NVIDIA, the AI trade is also getting a big bump this morning after a sharply lower close yesterday, driving the market action this morning, in part, a new report from the Financial Times that Anthropics bankers and book runners are weighing plans to boost the company's IPO valuation to a whopping$1.5 trillion or more amid surging demand from investors.

7:24The new target is well past yesterday's$70 to$78 per share price range. Anthropic is set to price its IPO on Wednesday next week before trading on Thursday. Now, on top of that, we're seeing shares of Neocloud. CoreWeave surging ahead of the opening bell after topping Q3 estimates and raising its full year outlook on stronger demand for AI infrastructure. Company sales grew nearly 170 % compared to a year ago period. It's also rethinking its debt and financing strategy amid rising rate concerns. Corweave CEO Mike and Trader on the earnings call last night, weighing in on this strategy shift and what some are calling AI growing pains.

8:07We have positioned ourselves very well to be able to take advantage of this market that's going through a degree of volatility. At the end of the day, an AI cloud is a combination of a software layer that allows people to effectively manage their infrastructure, as well as a infrastructure build in and of itself. And what we believe is that, you know, we have done a wonderful job, probably the best in the market, delivering the software layer that's required. All right. Those core results are also boosting the rest of the neocloud sector, as you can see there. CoreWeave, IREN, Nebius, all up anywhere from six and a half to ten and a half percent, all of which are down between, by the way, 50 and 70 percent from their most recent highs.

9:03Steep drop off there. So amidst all of this, joining me now to weigh in is Kevin Rippey, the tech sector specialist over at Evercore ISI. Has many of these companies in his kind of view right now. And I wonder, let's start maybe with the core we results, because arguably, and I could make a strong case for it. It's the public market trade that's driving a lot of the activity right now for that pre-market tech boom that we're seeing today. Is it justified? is CoreWeave enough in terms of its earnings result to say, hey, maybe we can take a pause on the selling of the AI trade and find some kind of stabilization.

9:40Good morning. So I think to the question of is it justified, the best way to view it is through the lens of what were we going to learn last night that would provide a further shock to the downside, right? And on that front, the answer is no. We learned nothing that would suggest that there are further delays, that there are further bottlenecks that are impacting the company's ability to realize strong current demand. And that's really where I think investors' focus lives both here, where you say, yes, demand is extraordinarily strong. If you have available capacity, you can price at a massive premium relative to longer duration contracts.

10:17So on that front, all is well. To the question of financing, though, that's really what has driven the dramatic sell-off in the last eight weeks. On that front, we heard the company acknowledge that unsecured markets are unattractive at this time, and they do need to find$5 billion over the next 12 months to fund their current growth plans. So through that lens, I think it was largely confirmatory of all of the concerns that we had. But from a relief rally standpoint, a survive in advance type print is how I'd characterize it. We also learned a little bit about, I mean, the debt concern, to your point, has been a huge part of the story.

10:55We also learned a little bit about what they forecast to be that kind of tipping point, if you will, from where they can make enough money from their operations to cover more than just the debt service that they have to pay on this. That's maybe some clarity. Is that going to be more of the positive catalyst there? Or is the idea that demand can still remain resilient, even with some of these scaled down expectations for CapEx from their biggest customers? Well, the quarterly equity story has always been reliant on the residual value assumptions, right? Once you get through the initial three-year contract, four-year contract that you might have in place, what balance of value is left on the GPUs that you've acquired?

11:37And on that front, every day that we move through that demand remains strong, gives you more confidence that you'll get through, you know, the debt service, you'll pay down, you know, from what they always refer to as sort of the box, right, the delayed drawdown debt, and then be able to return all of that incremental cash flow to shareholders. So through that lens, I would say the print and the way that they discussed how they're seeing demand continuing to shape leaves you more confident. The other thing that inspires confidence is something we mentioned before. Anthropic may be reportedly looking to target an even higher valuation and range for it because there is investor demand there to accommodate that higher end expectation for market value.

12:19Is that also going to be something that is going to have a ripple effect across the entire AI ecosystem? Because it means investors still think that the frontier labs are going to be one of the biggest providers of capital to the rest of the ecosystem. Well, let's say sentiment around the frontier is the core driver of the AI trade sentiment, right? Like that is where I think things begin and end. Over the last two weeks, right, we've had the two really catalytic events of the 4Q, right? We had the election, which we can have a discussion about. But as you think about how the anthropic sentiment is shaping up, there was concern that this might be sort of a limp into the finish line type event, particularly as we saw some of the volatility late last week.

13:01When you see reports overnight, like we saw that the range is moving higher on the deal, when you hear otherwise direction of travel is positive, I think that really underpins, particularly against the most recent volatility and sell-off, a much more positive way that the market could shape into year-end. We get through this event. We look out into December. And you can draw up quite a bullish construct. All right. It's a fascinating conversation, one that we have to have way more time for the next time around. Kevin Rippey, Evercore ISI, thank you very much. We appreciate the conversation. Thank you.

13:37All right. Well, you're going to hear more from CoreWeave's quarter when the company's CEO, Mike and Trader, as you see there, joins Squawk on the street in a first on CNBC interview, 9.30 a.m. Eastern time. We've got a lot more to come here on Morning Call, including hot inflation, hawkish Fed heads, and one major Wall Street banking giant boosting its rate hike outlook. what it all means for your money today. Plus, a CNBC exclusive with the CEO of defense giant L3 Harris sitting down with our own Morgan Brennan in a little less than 30 minutes time. We've got a very busy hour still ahead when Morning Call returns after this commercial break.

14:15Your financial life rarely fits between nine and five, and the questions shaping your future don't follow a schedule. That's why Citi created Citi Sky, a secure AI member of your Citi wealth team built with the Gemini platform on Google Cloud. Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com slash AI. City Wealth Investment products and services are provided by Citigroup Global Markets, Inc., member FINRA and SIPC. Which NHL teams are scoring big off the ice? CNBC Sports' Michael Ozanian has the numbers.

14:51If a dot margin in the NHL is right there with the NBA. Official NHL team valuations revealed Friday in Squawk Box on CNBC.

15:24modest 33. Now, it's the third straight month of an upside surprise in inflation reads, prompting economists at Goldman Sachs and Deutsche Bank to change their outlook for Fed rate hikes, expecting a quarter point move now higher in December, January and March. And amid a flurry of fresh hawkish comments from Fed heads in the past 24 hours alone, including the likes of Austin Goolsbee, Anna Paulson, and Chris Waller. Traders in Fed Futures via the CME FedWatch tool and those on Calci are now almost fully pricing in a quarter percentage point hike at the December interest rate meeting. Joining me now is Joe Mazzola, the head of trading strategies over at Charles Schwab.

16:08And Joe, the inflation story is an overriding one. It has been for months now, especially since the Iran war began. Fuel prices are a huge part of that. Interest rates have responded. The tech trade has suffered partly because of it. How exactly is all that playing out with how Schwab clients, the millions of them out there, are actually moving their money around? Yeah, good morning, Dom. Thank you for having me. Here's what's, you know, what I found interesting specifically in October was, you know, we saw a lot of dip buying in tech, especially some of the names that are pulled back. So whether that was Micron, NVIDIA, those were two of the big names.

16:48SpaceX was number one as well. But it's going to be interesting these next couple months just because the way interest rates, when they rally like that, it does discount some of those future cash flows. And when you have interest-sensitive sectors like technology, especially high beta technology, you can see some whippy action within those names. You know, not only did you see the 10-year get up to 5 % yesterday, but, you know, to me, the bigger move was in the two-year, the front end of the curve up 18 basis points. That's something, Dom, that we haven't seen since the tariff tantrum of April 2025.

17:24So a lot of activity in the fixed income market and how that spills over the equity market remains to be seen. But, you know, one thing that I will call out from yesterday was, you know, it did seem like there was more buying that kind of pushed into the close when you really had the opportunity based upon the futures in the morning for a big flush out. And there was, you know, there definitely saw some buyer step in. Yeah, Joe, I mean, to your point, that two year note yield, right, that kind of more front end of the curve is that proxy for future rate policy, excuse me on that, and everything else happening there.

18:02I wonder, though, if you take a look at the way that trading activity has started to shape up, do you feel as though it is more kind of fundamentally driven these days, the market action, whether up or down? Is it driven on headlines? Is it driven on earnings reports, metrics that companies report? Or do you feel as though there is an increasing amount of technical trading, meaning that people look for levels? They look for kind of movements towards lower standard deviation bands like Bollinger ones. Are they following RSIs? How exactly are traders now evolving their strategy to blend some of that fundamental with technical analysis?

18:39Well, that's a great question, Don, because we actually separate it into traders versus kind of investors. And, you know, with the traders, it's very tactically driven, as you're alluding to. You know, it's they're looking to buy the dip, whether it's, you know, one standard deviation, two standard deviation moves, as we've seen. I names. There are multiple standard deviation moves. And they're doing it in a couple of ways, which I really find interesting. You see a lot of put selling from our trader base that are looking for opportunities to maybe buy some of these stocks at lower prices if they're assigned, taking advantage of the higher implied volatility.

19:18And then we saw the VIX hit 29 last week. So they're looking to kind of capitalize on that. And they're also adding equity or adding to their equity positions when you're seeing those pullbacks. And on the flip side, you know, one thing that I think is interesting is, you know, they're also willing to trim. So some of the software names that had held up a little bit in October hadn't really felt the full brunt of that pullback, whether that's, you know, stocks like Microsoft, Apple, Tesla, those were that's where we saw some trimming. So they're, you know, they're looking to pick their spots. But, you know, that's a little bit different activity than with the investors.

19:55I think investors still are looking a little bit more towards ETFs for some of that diversification as opposed to stock picking. And Joe, before we let you go, you mentioned some of the places they are going, like chips and buying the dip in technology. We've talked so much about the broadening out trade for the past year, year and a half at this point. Do you still see activity outside of tech that people want to buy? Oh, sure. I mean, if you just look at the equal weight trade relative to the market cap weight, that its equal weight has been holding up. So what's interesting, Dom, I think, is really this rotation underneath the surface.

20:30So you're seeing drawdowns of 45%, 50 % on average within the NASDAQ. But at the same time, it was about a 10 % correction. So underneath the surface is where you're seeing all that churn. But yet, it's not a full-fledged selling. It's just kind of a rotating into the other sectors. There's definitely more of a defensive posture to the overall market. But at the beginning of this week, and then as you were talking with your former guest with the Corby results, we'll see whether or not traders and investors start to kind of matriculate back into some of those higher beta names, maybe hoping that a floor has been put into place.

21:13Well, the recent market action over the last three or four years has suggested that's pretty much the muscle memory. So, Joe Mazzola, thank you very much for the conversation. We'll see you again soon, sir. Thank you. All right. Well, straight ahead on the show here as Anthropic barrels ahead with its IPO, rival OpenAI making waves of its own, reporting surging sales and heavier losses. You can see their morning calls back after this. Your financial life rarely fits between nine and five, and the question shaping your future don't follow a schedule. That's why Citi created Citi Sky, a secure AI member of your Citi wealth team built with the Gemini platform on Google Cloud.

21:51Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com slash AI. CitiWealth Investment products and services are provided by Citigroup Global Markets, Inc., member FINRA and SIPC. All right, welcome back to Morning Call. Let's now send it back out to Morgan Brennan, who's in Washington, D.C., sitting down yesterday with a number of business and policy leaders at the Chamber of Commerce's B20 summit. Morgan, I'll send things back over to you.

22:23Morgan Brennan: That's right. It was a very busy day and what is a very busy week. As usual here in Washington, D.C., the B20 USA summit continues here. I sat down with the U.S. Chamber of Commerce CEO Suzanne Clark to discuss the policy landscape for business in the wake of midterm elections. And I asked her whether, as some show guests have put it, the U.S. has now seen peak tax cuts and deregulation. I think it's the right question because the tailwind we had from the tax reform and the deregulatory tailwind are really big and really important to the economy. And you know, I've told you before, I'm not sure the administration gets enough credit for it.

23:00I will say the deregulatory effort is not done. Just yesterday, we won, the U.S. Chamber won a big case in California where we sued them over their climate disclosure rule. And so it's not just at the federal level, but at the state level where we have to beat back these huge regulatory efforts that just strangle the economy.

23:22Morgan Brennan: And of course, we know investors are focused on the state level. We discussed AI and the data center build out as well. I also asked Clark whether as the NVIDIA spy scandal unfolds, the stakes are higher, perhaps more higher now than ever in the age of AI when it comes to corporate espionage, geopolitical risk, and what that means for companies like NVIDIA. I think it's been a priority for a long time, and I think it's a place where government and business have worked really closely together. I think the government does a good job of warning business about what it's seeing. Business does a good job of warning government about what it's seeing.

23:55And those partnerships have existed for a long time. I think you're right that the stakes feel high right now with this big AI race. But I'm confident that we're going to figure it out.

24:06Morgan Brennan: All of this ahead of APEC, where President Trump and China's Xi are expected to meet. I think this constructive stability moment that we've been in with China has been important. I think the question will be, do some of the agreements the two presidents have been making actually get executed? And do we get to a point where we're working better and more closely together on critical minerals, on some of the issues that they've put on the table? So I'm confident about their relationship and that it's headed in the right direction. But I think this idea of where are we protecting our economy against any of our adversaries and where are we allowing real trade where there are open lanes that aren't nationally security related are important areas for U.S.

24:50companies.

24:50Morgan Brennan: Overall, how do you expect trade policy to evolve from here? Tariffs, for example, something the Chamber's been very vocal about, written a lot about in recent years as well. Look, I think if you're going to use a tariff for a really targeted moment to get a better deal for American companies, that's a good thing. If you're going to use a trade barrier for our national security, that's a good thing. But what we haven't seen is these tariffs result in actual trade agreements. What we want are more markets for American goods, better deals for American companies, more investment, easier in the United States.

25:22So my hope is that we can turn from these uncertain tariffs to actual trade agreements.

25:29Morgan Brennan: What are the conversations you find yourself having around this idea of oversight and investigations and corporate America or CEOs potentially caught in the boss hairs? This is another area of uncertainty. If you have people being investigated for doing things that were not illegal but were politically unpopular, that's just another sign of uncertainty for CEOs and a distraction. And again, not what the voters asked for. The voters did not say, you know what we'd like? We'd like more political theater. The voters said, let's do the important work of getting the economy growing again. Now, in light of all of this, something to watch, permitting reform, which is making its way through the Senate this week.

26:06Morgan Brennan: And it kicks off a lame duck session that has a laundry list of items that are in focus, not only for policymakers in Washington, but for a number of industries and for Wall Street investors as well. We're going to continue parts of that conversation a little bit later here on the show. That full interview with Suzanne Clark, though, is available on CNBC.com. All right, Morgan, thank you very much for that. We'll see you in just a few moments here. Still on deck for the show, CEO of Defense Shine L3 Harris sitting down with Morgan. Coming up next, Morning Call continues next. I'm Dominic Chewin for Morgan Brennan.

26:39Welcome back to Morning Call. Let's check on U.S. equity futures, which are turning maybe slightly mixed, just slightly though, okay? After a mostly lower day for stocks yesterday, following that hotter than expected inflation read. As you can see here, the Dow is now hovering and wavering between gains and losses, but modestly so. The S &P is up and applied by 60 points, and that NASDAQ 100 trade up by about 475. Reminder, bond markets are closed for their Veterans Day holiday here in America. Here's where yields did close in yesterday's session. Five, the big figure, 5 % on the nose for the benchmark 10-year note yield.

27:12The two-year note yield, 4.748%, and again, 5.358 % to close yesterday for the 30-year long bond. Let's get back now to Washington, D.C., and our own Morgan Brennan, who's sitting down with a very special guest, Morgan. All right, Dom, thank you.

27:31Morgan Brennan: Yes, I am sitting here at Shield Capital's Mission Matters Summit. I am joined by the new CEO of L3 Harris, Sam Mehta. First broadcast interview, it's great to have you here. Appreciate it. Good morning, Morgan. Thanks for having me on. So a little less than three months on the job here. As I mentioned, first broadcast interview, what do investors need to know about you as you take the helm here at a critical moment, not only for the company, but for the defense industry. Yeah, I'm happy to address that. But I think we'd be remiss if we didn't first thank all the veterans out there for their tremendous service, the millions of folks who've put their lives on the line to make sure that you and I can sit here and have this conversation about the future of our country and the future of the defense industry, including the 10 ,000 or so that continue their service within L3Harris.

28:17So thank you to all of them as well. I think we're at a real tipping point right now in the defense industry. We think about modern warfare and the way conflict has changed. Companies like ours have to adapt very quickly to make sure that we have the capabilities. And we bring those capabilities to the warfighter as quickly as possible by partnering with new defense tech startups, investing in our own facilities and capital. I think we recently announced a$3 billion investment in solid rocket motor capacity to make sure that we can continue to meet those growing threats. So I think it's about investment, building for the future, and making sure we have a long-term vision that's aligned with the national defense priorities of our country.

28:54Morgan Brennan: Yeah. Analyst at Citi basically outlined it as there's major defense megatrends underway. Munition replenishment, which we just touched on, space, and international rearmament. Do you see it the same way? Absolutely. And we're very aligned with what we do in L3 Harris and those two categories. Obviously, in munitions, solid rocket motors, we are the largest provider of solid rocket motors. We're doubling, tripling, quadrupling production on some of these large tactical motors that are so incredibly important for defense of our interests, our partners, our allies, and our homeland. In space, we have about 70 satellites that we'll be launching over the next few years.

29:28You know, a few years ago, Morgan, we weren't even a prime contractor in space. Within a relatively short period of time and a lot of investment, we've been able to significantly ramp up, and now we've become a major player in space. On the international side, we have about 23 or 24 percent of our sales in international. That's the fastest growing part of our business as we make sure that our partners and allies have the same capabilities and ability to be able to defend themselves from growing threats.

29:54Morgan Brennan: When you talk about things, and we'll take the example because it's been one I've been covering all year. There's hundreds of billions of dollars in investment going towards this overall. the massive ramp, the exponential ramp in missiles and munitions production and replenishing stockpiles and then some. Do you have what you need in terms of supply chain to be able to do it? We've invested very heavily in the supply chain. You know, we've taken a good look at our supply chain, looking at sole source, single source suppliers, and making sure that we diversify that supply chain. We're also, Morgan, making sure that we invest in ourselves.

30:26So in areas where we think we have a vulnerability, we're open to vertical integration and making sure that we can supply critical components when our suppliers can't be our delivery in our timeline. We're not talking about tens of millions. We're talking about hundreds of millions and billions of dollars investment that we've made in that supply chain.

30:42Morgan Brennan: Yeah. And you and I have talked about this before recently, but I am going to ask the question again. Plans to spin that solid rocket motor business into an IPO still on track for sometime, perhaps mid-2027? I think we look at mid-2027 as the decision point as to whether or not we should move forward with an IPO. Morgan, we're not going to do anything. We're only going to proceed with an IPO if that creates substantial value for our shareholders. And, you know, full stop on that. And the reason why I say that is because that is not interfering. And that's a separate discussion from where a lot of our focus is making sure that we double, triple production of solid rocket motors to support our DOW and our prime contract customers.

31:21Morgan Brennan: So as we have this whole conversation, how does a new composition of Congress shape or change that? How are you navigating those possibilities? Needless to say, the last couple of weeks have been very dynamic. I can tell you that we work with folks on both sides of the aisle. The types of products and capabilities we have tend to have bipartisan support. I don't think you'll find anyone on either side of the aisle, whether they're a Democrat or they're a Republican, who doesn't believe we need to strengthen our stockpile for munitions and solid rocket motors. That space is an incredibly important domain.

31:52And we have a near-peer adversary who's making advancements every day that we need to match and we need to exceed on a regular basis. So we like to think ourselves as making sure that we continue to operate key franchises, key capabilities. And both of those have a lot of bipartisan support.

32:09Morgan Brennan: Lame duck session. I just touched on it a little bit earlier in the show. But there is a list of items that need some attention from lawmakers right now, including the defense policy bill, the NDAA, National Defense Authorization Act. Also, perhaps getting a budget passed. We'll see if that happens. We're currently operating on a continuing resolution and also questions about whether reconciliation can happen, too, which I think some of the missiles and munitions funding is attached to as well. Your thoughts? We certainly hope that this remains at the top of the list from a priority standpoint.

32:39You know, continuing resolutions are a way to keep the government running. I think we've all become used to them. We really desperately need a budget. To think about the global dynamics of the world we live in, we need to make sure that we have the confidence, we provide the confidence and the predictability to our warfighters, that they'll get the capability they need within the time frame that they need them. I think the only way to do that is a budget. Having said that, I will tell you, Morgan, we're focused on execution of what we have. I think 80 % of our revenue next year in 2027 will come from funded backlog that we already have.

33:07So we're heads down making sure that we control what we control is getting that capability to the warfighter.

33:13Morgan Brennan: Yeah, and you also have a large, a sizable, and growing international business, too. It's not just defense budgets and focus here in the U.S. as well. It's what we're seeing from a demand picture across the world, given the geopolitical landscape. I spent a lot of time, including last week, in the Middle East, in Eastern Europe, with a lot of our partners and allies in those regions. They see the emerging threats in the same way we do. Think about things like counter-UAS, you know, the ability to be able to defend your homeland against drones, against incursions. They're no less passionate about protecting their civilian infrastructure and their populations than we are here in the U.S.

33:51And they're choosing companies like L3Harris because we can bring that capability because of what we've already proven in partnership with the Department of War.

33:58Morgan Brennan: Defense Tech, it's become a hot area of investment both in public and private markets overall. How is the technology evolving and what does that mean for L3Harris? I know you partnered, for example, with Shield Capital, whose summit we are here for today. Yeah, we're excited about partnership with Shield. I think we're one of the foundational members and supporters of Shield. We've had exposure at almost 100 companies in the defense tech space. That allows us to be able to understand, not only participate and help them evolve their capabilities in a way that will complement our product and technologies, but understand agile development.

34:30So some critical areas like artificial intelligence, we've been leveraging very heavily all the ability they have to be able to innovate quickly, incorporating into our products and making sure that we get them to the warfighter.

34:42Morgan Brennan: All right. Sam Mehta, it's great to have you here. Appreciate it. Appreciate it. Happy to have you ever say war. Yes. Yes. And I could not have said it better myself. Happy Veterans Day. And Dom, we said it earlier in the show. I'm going to say it again right now. Thank you for your service to all of our service members and to our veterans. And we owe you a debt of gratitude. So Sam Mehta, CEO of L3 Harris, thank you for being here. Thank you, Morgan. Dom, we'll send it back to you in the studio. All right. Thank you very much, Morgan and Sam Mehta as well. And happy Veterans Day. Keep it right here.

35:11Morning Call is back after this. Welcome back to Morning Call. A news alert here on OpenAI. It's revenue rising about 50 percent to$10 billion in the third quarter, even as it continues to post steeper operating losses. Reports say the company has told investors adjusted operating margins improved from the previous quarter sequentially, although there are still negative adjusted operating losses, taking up slightly to nearly$11 billion. dollars. This, as the Financial Times reports that rival Anthropics bankers are weighing plans to boost the company's IPO valuation to at least 1.5 trillion dollars due to surging investor demand.

35:47The new target is well past that 70 to 78 dollar price target range the company set yesterday. Anthropics plans to price the IPO next Wednesday. You can see there and start trading on Thursday. Morning Call is back after this. Welcome back to Morning Call. Time now for your call sheet where we look at the topics driving the trading day ahead. The crew members assembled today are Jeff Kilberg of KKM Financial, also a CNBC contributor, Matt Powers of the Powers Advisory Group, and Jose Torres of Interactive Brokers. Gentlemen, thank you very much for the early wake-up call this morning. Let's start with the macro picture.

36:23We spent a lot of time on tech and core weave to kind of start this show off. And Jose, I'm going to turn to you for this one first. First, the Fed rates, everything else is a key focus for investors because of the way we saw things move. Bond markets, yes, are closed today, but we are awaiting data on PPI, wholesale inflation. We got CPI already. What exactly do you think rates look like in the final weeks of this year? I think we have space to come down, Dom. Yesterday was an overreaction. I thought Fed Governor Waller's comments signaling a potential 50 basis point hike was poorly timed. Oil was$104 earlier this month.

37:02Yesterday, it fell to an 11-week low at$83. So inflation here in November is geared to actually contract. President Trump and the White House not looking to re-escalate geopolitical tensions. So the inflation picture is still problematic, but it's driven by a single factor, which is energy. That looks like it's cooling off. No need for the Fed to rush can go one at a time. A double is way too much. All right. Now, Jeff, I mean, arguably, there were some other parts of that CPI report that were not fuel that did cause a little bit of concern. But the point is there that inflation is coming down in certain key parts, which is more important to the markets right now, that kind of rate story as we see inflation evolving or the economic growth outlook story just about the entire economy and how it's poised for this kind of AI revolution?

37:55Well, Dom, first I want to express gratitude of all the men and women who have served our country. But Jose was absolutely right. That was an overreaction yesterday. So to answer your question, I think the growth story is much more important. Earnings matter when they matter. So look at what's going on. 88 % of the S &P 500 has reported earnings, Dom. We're looking at a 31.6 year-over-year earnings per share growth. To put it in context, Dom, the 10-year average is 12%. It was 8 % prior to the last three quarters of consecutive 25 % growth. So I get excited. We're looking at a big move earlier this morning.

38:30NVIDIA may be back here up about 5%. But I think when you take it in context, Jose really highlights a great fact. That was an overreaction yesterday. They floated the 50 basis point balloon. Don't click on the bait. It's not happening. The Fed just inserted a new word. If you remember, Fed Chairman Walsh inserted the word accumulation. They want accumulation of data. So PPI is important. All right. So this is going to be key here. Matt, I'm going to turn to you because those are the macro factors at play. But part of that massive growth story for earnings and everything else in the economy has been the tech and AI boom and the anticipated boom that we will see in the coming years.

39:07is the bounce that we're seeing in tech shares. I mean, the two day volatility aside, the massive move lower on the heels of the election, the bounce back, the volatility is tech positioned well for this particular move into the end of the year. Yeah, you know, I've been here's what I'm worried about is the debt spend. I've been worried about it for a while. And I think I think most investors are you're talking about half the GDP growth in the US is coming from this. And I think a lot of these companies are spending far more than they'll ever earn back. So what's changed here? I think investors have started to actually care.

39:44And a year ago, this is this cycle. A year ago, you had a company would announce a huge CapEx and the stock would go up. Now the stock goes down. And so we're at this borrowing stage now, which is a lot more concerning to me. So you got$300 billion of borrowing this year. Expect another$400 billion next year. It's a lot of debt that's going to mature. AI buildouts. I mean, it's debt with returns that no one can promise. So I just think the gap gets wider between a lot of these companies that pay out of their own cash and companies that keep borrowing to stay in this. All right. Now, that borrowing is going to happen from all kinds of companies across the entire market cap spectrum, Jeff.

40:20But the types of companies that investors should be looking more towards for the best relative gains are in which part of that kind of stack, if you will. Well, Dom, I think Matt's absolutely right. There's going to be winners and losers. We're seeing what's going on in the neoclouds. But when we look in our growth ETF, we leaned into the pain last week. And look at AMD. AMD was the poster child for that overblown reaction. We saw the best earnings ever. AMD came out with a record revenue over$13.38 billion, 45 % year-over-year growth. What happened to the stock? It went down 25%. Now it's up 35%, making new highs above 540.

40:58So I think you have to really realize it is a stock picker's market. Embrace this sector dispersion we've seen all year. So some of these names, some of these beat up semiconductors name, those are the names that we want to own. So you have to dance between the raindrops, Dom, no doubt about it. But I think the tech trade is not over. The CapEx spend that Matt was illuminating, that is committed not just for next year, but also for 2028. All right, Jose, the economic story around AI, data centers, the build out that we're going to see, how much are the expectations as we see them today properly aligned with those growth expectations?

41:33Or are they misaligned with just how much the economy is going to benefit from this kind of anticipated AI boom? I think the benefits are there. We see GDP being quite significant. We got that beat a few weeks ago in the third quarter. Overall, I think that there's going to be a few companies that do terrific. Others won't do as well. But the theme is thriving. As far as the market, the queues here are looking to open way above its 200-day moving average. That's a big positive because in recent sessions, it was a hurdle that it struggled to get past. So I think we're set up really well here for year-end.

42:12I I think a gradual slowdown is to be expected, given that the AI expectations have been in the nosebleeds. And that's better than if we have a more sharper decline. All right. Let's talk about that market setup, as Jose just alluded to. Matt Powers, if you're looking at the way that markets have gyrated post-election and kind of the stability or consolidation that we're seeing right now, is the next leg for the market higher or lower and why? You know, here, Monday. Monday was encouraging. You know, SANS and NVIDIA, there's buying across the board. We had all 11 sectors were up. So you look at the past month, you got the equal weight S &P is up around 4%.

42:51The NASDAQ 100 is down double digits, I think 10%. So that's like a 99 percentile historical divergence. So I just think investors are rethinking where they want their money and it's a healthy thing. So the election, yeah, I mean, it was the catalyst behind a lot of this stuff, but I don't think it caused it. A lot of that was coming anyway. So I wouldn't be shocked, and this is not necessarily going into year, but maybe for next year, I wouldn't be shocked if some of next year's best performers have absolutely nothing to do with AI. All right. So with that in mind, Jeff, you mentioned before dancing between raindrops and that semiconductor trade that you see could possibly bouncing.

43:27What other parts outside of tech is the market set up for on a relative outperformance basis? Well, Dom, I think Matt helped me speak my book, Our Equal Weighted Essential 40 ETF. That is really capturing this fierce rotation, and it's illuminated again today. But the S &P 500 being back above that pre-midterm election level, that's really key. So I think the rotation in industrials, we still want to own utilities. We have to be diversified because that reliance on the MAG-7 has been so uncertain. And there's more uncertainty. We don't know NVIDIA. We don't know all the scrutiny that's going to happen there.

44:01But with NVIDIA currently in 750 different ETFs, short term where NVIDIA goes, the market will go. All right. And maybe the market's giving you a bit of a clue right now because the NASDAQ 100 trade is implied higher by 450 points at this point. Gentlemen, Jeff Kilberg, Matt Powers, Jose Torres, thank you guys very much for being part of the crew today. Have a great day. We'll see you guys later on. And keep an eye on those markets here. Modestly bid for parts of the market, but the tech heavier NASDAQ up higher.