Election Day, Data Center Debate and AI Sector Fallout

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1:03The midterms and your money. Welcome to Power Lunch, everybody, and happy voting day. Americans heading to the polls to decide on the political future in an election that could reshape the control of Congress and the policy and money debate in Washington. Investors, though, watching more than just that election scoreboard. The outcome could influence fiscal negotiations, defense, spending, health care, banking, energy, data centers, and more. And someone who is watching it closely is Barry Sternlich, the founder and CEO of Starwood Capital. He's steering one of the world's largest real estate investment firms through a market being reshaped by higher borrowing costs, tight financing, and shifting property values.

1:42He joins us. And Andrew Yang is here as well. The entrepreneur and former presidential candidate first brought universal basic income into the national conversation, warning that automation could disrupt millions of jobs. Now, as AI reshapes work in the economy, he's pressing for a debate over who benefits and who could get left behind. All right, we've got a lot more to do. And really, tomorrow is going to be the real day of any fallout from the election. We'll get to more on all of that. But let's begin with the recent troubles in tech. The Nasdaq is right now bouncing back a bit. But let's be clear, it's been a very rough ride the last couple of weeks.

2:18with the drop from its highs. The NASDAQ 100 was sitting right on a correction coming into today. In other words, it was down just a little over 10 % from its highs of a few weeks ago, and the damage was just beyond the overall index. Look at this. The memory ETF DRAM down 40 % from its highs. The SOX Semiconductor Index, 27%. The tech sector overall down 11 % from their highs. All corrections or bear markets. Now take a look at some of the individual stocks in the NASDAQ 100. These are the sell-offs from the recent highs. Applevin, down 66%. Corweave, 62%. Intel, 57%. Western Digital Arm. And even previously trader-favorite, SanDisk, down 52%.

3:06But even with those huge declines, your first guest today says the market is getting it wrong on the memory stocks. And he sees considerable upside on many of the names in his coverage list, including some of those names that we just showed you. Mark Newman is managing director and senior analyst at Bernstein and joins us now. All right, Mark, those are pretty big declines. What are investors, what are investors or what have investors gotten wrong? Well, I mean, clearly the market is panicking that the worry is that the AI bubble is about to burst. We don't really see any evidence of that. But the worry is that the capex is going to suddenly decline significantly and lead to a significant glut in memory.

4:02But in fact, the opposite is actually the case uh demand remains very very strong compute remains very very tight and because of that demand for memory and storage memory dram nan flash hard disk drives is all way way ahead of supply and so pricing for all these components continues to go up despite the share prices recently going down so the market i think has got this uh wrong um but clearly there's a lot of panic in the market. And so, Mark, based on what you heard, and we heard iPads, there was a little bit of an issue there. Services, maybe a question. Mark, you raised your Apple price target today.

4:43Why? Yeah, so for Apple, last night they reported very strong revenue, and the revenue guide was actually surprisingly strong despite this staggered launch where they're delaying the base model, the 18 base and 18 air to March. Despite that, iPhone revenue is still trending up and they guided 8.5 % in the midpoint revenue growth year on year for the December quarter, which is just phenomenal given the fact that their biggest best-selling model is delayed until March. It's just phenomenal numbers. The weakness from Apple was gross margin. Gross margin was a bit light, and we did worry about that into the print.

5:29But despite that, revenue growth makes us still optimistic on the long term. I think stepping back a little bit today, which is a bit healthy because the stock had been on such a good run the past few months or so. And so I think a little bit of a pause here is actually pretty healthy. But I feel very positive about it on the longer term. Okay, some of these stocks, as we just showed, have been hit hard. You still like them. So maybe getting them at a discount. What are your best ideas right now? Yeah, right now, I still like them. I mean, our top pick is Seagate because for Seagate, it is significantly lower risk than some other memory names.

6:09I mean, I still am optimistic on the memory names too. And I'll be buying SanDisk here given this sharp dick. But Seagate overall has the lowest risk because hard disk drive pricing is actually accelerating. It's not decelerating, so not just going up, but it's actually accelerating. And furthermore, they have a significant lead in technology, which is the hammer technology, the next generation hard disk drive technology, which means their costs are declining faster than competitors. And so accelerating prices and then accelerating cost declines it's cost declines and strong volume growth, it leads to this over 100 percent earnings CAGA continuing.

6:56And so right around here, it's trading low teams on earnings CAGA, well over 100 percent. So Seagate is our top pick. We also like Western Digital and Sandisk. But Seagate, we think overall is the best right here. You're saying it so calmly, Mark, but it takes a strong stomach to withstand the selling pressure some of those names have seen. Thanks for joining us today. We appreciate it. Absolutely. Thanks for having me. Mark Newman of Bernstein. And to his point, Brian, those declines that we've seen in some of those memory names, I mean, had many, including myself, thinking that chart had kind of peaked over the summer, I don't know, maybe for good.

7:38And it's fascinating to watch as people say investors have just been too impatient with the AI trade, too quick to jump out, too quick to declare it's over. If he's right, maybe there is a little bit of life still. Yeah, and I think the other thing we should have done or could have done, and I want to remind our viewers, a lot of these stocks have still made people a lot of money. Yeah. So they're down 30 % or 40 % or 50 % off their highs, but they've still made people a fortune if they timed it right. If you bought it recently, it's been rough. But if you've owned it for more than a year, six months, two years, you have a giant yacht.

8:09Very well. At AMD, quickly, we can look at that as well. They report after the bell. It's up 5 % today on some of these kind of this kind of relief rally, maybe we can call it. It's down 11 % over the past week, and it's up 160 % year to date. So, yes, in some of these cases, we all have to zoom out a little bit to see those 128%. Let's do that right now with a really smart guy and a really smart next guest, because between AI credit concerns, the midterm elections, the Iran war, there's been a lot of headwinds or a lot of headlines for stocks coming in today. as we noted, the NASDAQ 100 hit a technical correction, falling more than 10 % from its recent highs.

8:47But as tech has sold off, people raised money, and many of those buyers went back into or just went into value stocks. So if that's what you're thinking about doing, we have got the perfect guest for you right now. Joining us, Harris Oakmark Partner Portfolio Manager and U.S. Co-CIO Bill Nygren. Bill, really great to have you on a program day like, well, I don't want to today, the last two weeks, because as people have sold some of these stocks, the headline indexes have gone up because they bought other names. What have you and your team been buying? Well, thanks for having me, Brian. Yeah, at Oakmark, the past month has really been almost polar opposite of what's been going on in the S &P or the NASDAQ.

9:35October was a very good month for us. We were up something like 6 % when the S &P was down. But even after that gain, it's left us slightly below the S &P 500 for the year. And our message to investors is we don't know about the AI trade. We don't have conviction on whether or not you should own those names. And when we don't have conviction, we stay away. And where that has left us is the rest of the market, which rarely people want to talk about today. It's financials, it's energy, it's healthcare, industrial companies, consumer products. And a lot of those are selling at barely double-digit PE multiples.

10:19And in fact, a lot of them at single-digit multiples. And I just think that's a whole different world than the world that people like Paul Singer or Jeremy Grantham are talking about when they're focused on what the risk is in the AI stocks. Our companies at single-digit PEs are large repurchasers of their own shares, and that supplements relatively slow growth in earnings to create pretty decent earnings per share growth. So we like the opportunity set today a lot. Let's talk about Fiserv. It's almost leading the S &P 500 today. This is a stock that you like. And how much more upside could there be?

11:05You also like Synchrony. You like General Motors. But it's a standout day for Fiserv. Well, it's funny. You look at a company like Fiserv, and what did they do this morning? They basically hit their targets for the quarter, and they pulled forward their share repurchase maybe a quarter sooner than what people were expecting. When you sell at like seven times earnings, that's enough to make the stock go up. And I'd contrast that to the companies that are selling at PEs in the 30s or north of there. And we've seen them hit targets and then their stocks collapse double digit percentages. When you start at a single digit PE, the market's much, much more forgiving.

11:48And then you've got General Motors. Obviously, Bill, I like talking about cars, but for years what GM did wrong, according to guys like Bill Nygren, was that they used their money and they built things that people didn't want to buy. They just basically burned money. They wasted it. Had they gotten smarter? Is Mary Barra the right CEO right now and being smarter about how they spend the billions they earn? Well, it wasn't just in cars, Brian, of building cars people didn't want. More importantly, it was trying to diversify their business into areas where they just didn't have a right to win. And so for years, investors never got the benefit of all the free cash flow that General Motors was generating.

12:33When Paul Jacobson came in as CFO, the company went through a radical reorientation of how they were going to use that cash flow. And they've been buying back stock aggressively. In the past four years, they've taken out about 40 % of the share base. So if you owned 1 % of the company before, today you own almost 2 % of the company without having to have changed your share ownership. And they've announced a repurchase that they just announced at the end of their third quarter report for another 25 % plus of the company that they expect to get done in the next two years. The growth in earnings per share you get from that kind of share reduction is really pretty amazing.

13:21If GM had flat earnings for the next two or three years, earnings per share would still be up by 35 % or so. And the stock, it's supposed to earn about$15 next year, sells for less than$90 a share. So even though it's been a good performer, it's still only six times earnings. You like it. And by the way, I see a lot of new Tahos and Suburbans on the highways of New Jersey. Bill Nygren, real pleasure. Synchrony, Fiserv, not Fizer, whose CEO is on the exchange. And General Motors. Bill, thank you very much. Thanks for having me. All right, take care. All right, two down and more big interviews ahead, including Starwood Capital's Barry Sternlicht on what the midterms might mean for rates, real estate, the economy, and more.

14:10Plus, Nobile Mobile, CEO and, oh, by the way, forward political party founder Andrew Yang on AI and nothing short of the future of work.

14:27Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules.

15:01Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Computers are getting smarter, Silicon Valley's getting weirder, and AI is taking over. At least that's what everyone keeps telling us. Welcome to Machine Guides, a new NPR podcast that will be your field guide to the AI-powered future. We're veteran tech journalists with front row seats to the industry.

15:41And twice a week, we'll make sure you get smarter about AI. So you know what's real, what's hype, and what might come next. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

16:00As Americans head to the polls today, the future of the AI buildout is basically on the ballot. Of the 36 governor races today, PIMCO has singled out five to watch that could shape the future of the data centers. Ohio, Georgia, Nevada, Iowa, and yes, Texas. Our next guest says these results could mean higher costs and a slower growth rate for data centers, depending on who wins. Libby Cantrell is PIMCO's head of U.S. public policy. It's great to see you, Libby. Welcome. Hey, nice to see you, too. So we actually just spoke with Dan Clifton last hour. You guys are kind of mind meld on this. He said, OK, Democrats take two of the governor's races.

16:37That's one thing. Again, I think he's talking about the Democrats, although in both cases, in both parties, you have people who are throwing sand in the gears. But he said if there's five or more, that could slow AI capex. What do you think? No, I think that's exactly right. And I think we're actually very like-minded just in terms of what tonight may look like, looking a little bit like 2006, where you saw a very big Democratic wave kind of crashing against a relatively unpopular president. But we do think that this is where the real risk lies. This is not at the federal level. Yes, you might see Congress pass some sort of symbolic legislation putting some restraints on data centers.

17:16We find that hard to believe that President Trump would sign those into law. And as a result, it really is at the state level. And it's exactly all those states that you had mentioned. Ohio is ground zero for this, not only in terms of the gubernatorial race where both candidates have actually advocated for a statewide moratorium. But also, there are many ballot measures that folks will actually be voting on in Ohio and across the country. I mean, this has become the sort of new boogeyman for this election, certainly. And what we have been telling clients is that there is this kind of conventional wisdom that this is just election year rhetoric, we would push back against that.

17:56This has, we think, a lot of legs. Folks are deeply distressed about data centers. They are upset about affordability. They are suspicious of big tech. We think that's sort of all manifesting itself in this sort of data center backlash. And Kelly, as you know, oftentimes politics leads policy and the politics of this are just so bad. So we would find it hard to believe that you don't see some restrictions, both at the state level and at the municipal level sort of following this election. But again, tonight will be a good indication of sort of the direction of travel on this. Ohio's kind of a lost cause because both candidates are against it.

18:39What are the races to really watch? Texas is a big one, obviously, just because it's so much of the data center build out. where else will kind of be the tell, you know, if I'm tired at 8 or 9 or 10 or 11 p.m., Libby, and I just want to know what are my, you know, AI stocks doing tomorrow, what should I be looking at? Yeah, I mean, I would watch Georgia. I mean, the Georgia is one where the Republican governor candidate has advocated for this being a local issue, so not necessarily supporting a statewide moratorium on the other flip side though the democratic candidate um uh has advocated for a statewide moratorium so that is one where there is a lot of compute that has been planned that's sort of in the process if you will that would very much be vulnerable to again sort of a statewide moratorium nevada is another one iowa is another one michigan is another one and then of course as you said sort of the big kahuna, if you will, is Texas and then also Ohio.

19:40I do think that the, you know, if Amy Acton wins the Democrat in Ohio, she's going to be more likely, I think, to follow through on some of this rhetoric than Vivek Ramaswamy. But I think, Kelly, the bottom line here is, is that if you look at growth estimates for next year, they're all predicated on this, you know, basically this hockey stick in terms of CapEx growth. And what we're saying is you're not necessarily going to get sort of zero AI build out, right? It's just more that you're going to have more sand in the gears at both the local and at the state level. And that could just slow the growth.

20:13That could obviously be a headwind for growth. It could also have implications for inflation. And it could also bring down interest rates, something that actually President Trump has advocated for. That would be fascinating. Slow the data center build out to bring down interest rates so that We can all afford houses. It's all kind of circular and connected, I guess. Libby, really appreciate it. We'll be watching those closely tonight, and it helps us focus the mind. Thank you. Thanks so much. Appreciate it. Libby Cantrell of PIMCO. So as all of you hopefully head to the polls, two issues are top of mind.

20:46We just talked about AI, but what about jobs? They are connected. And Andrew Yang is here to weigh in on both after the break.

21:02Americans across the country are heading to the polls today. Here's a live look at Burlington, Massachusetts, where voting is underway. And two letters are on their minds as we were just discussing AI. Our recent All-America Economic Survey found that 52 % would pause AI development so regulations can catch up. 32 % say the U.S. needs to stay the course in order to keep pace with China. Another result that caught our eye, 63 % oppose a data center within 10 miles of their home, and only 13 % say they'd be okay with it. Joining us now is Andrew Yang, the CEO of Noble Mobile and the co-founder of The Forward Party.

21:37The last time he was on our program, he called for taxing AI, not workers. Andrew, it's great to have you back. Welcome. Thanks for having me. Big day today. Get out and vote. I'm sure a lot of people already have, like you all. Well, listen, my husband's an overachiever, so he made me go on Saturday. And I'm grateful for it because I was in and out in 30 seconds. But for you, are you looking to see AI being slow? Like, does Andrew Yang support a world of fewer data centers and a slower build out? Well, Andrew Yang thinks that a backlash is building, and that's not a good thing for anyone. In American politics, things tend to overshoot somewhat.

22:15And at this point, a clear majority of Americans have negative feelings or concern that their kids are going to come home from college without a job. And that's applying to more and more recent grads. So it's, to me, something where you have to address these concerns and try and make Americans feel included in this future that's being built. Yeah, I know a great way to do that. They should own individual shares of the companies that are built. I know it's a crazy idea, but what if the public companies or the ones who are going to let every single person in the country actually own a share of them?

22:52Maybe that would help. What a great idea. I'm certainly all for it. That would improve people's attitudes and also tie their economic futures to what's happening in AI. But on the flip side of the coin, you had Microsoft offering to buy out 60 ,000 workers over a quarter of their global workforce. You had Amex report rising profits and then still say we're going to lay off about 4 ,000 people. And both of those companies attributed it partially to AI. So we need to start making dramatic moves. Kerry, you referenced that I thought we should be taxing AI. We 100 % should. And that's not just me speaking.

23:31That's Dario Amadei, the CEO of Anthropic, saying, look, we're doing more and more with AI. We should have a way for the public to benefit. Well, big tech, Andrew, as you know, is pretty good. They like to suggest what regulation should be on them rather than waiting for Congress to sort of drop the hammer on them. If if you were advising and maybe you are, who knows, one of these giant AI companies about what they should be trying to get from Congress or maybe an incoming Congress, what would it be? To me, there has to be a grand compromise there. There should be a sensible approach to taxation and having Americans actually feel the benefits in their own lives while balancing very legitimate concerns, in my opinion, about having a data center in your backyard or what AI is going to do to white collar work.

24:26And you have almost half of recent college graduates now underemployed. And I'm a parent. I think you guys are as well. I mean, my kids are legitimately asking me, hey, what are we going to do for work? And that's a conversation that's happening across the country with millions of parents and their kids. But is that because of AI, Andrew, or is it because of just a sign of the times? And we do forget we're coming out of COVID. We had this huge shift where there was a lot of spending to some things, no spending in others. I feel like we're still not fully out of that pandemic lockdown hangover.

25:04Do you think we are? Oh, this particular conversation is being driven by AI completely. I mean, you have computer science going from the number one major in the country to now kids running the other direction. You have parents trying to advise their kids to head to vocational school or technical programs and not load up with debt. One of the major changes is that we all grew up with this notion that there's good debt and bad debt. Increasingly, a lot of the things you think of as good debt, particularly school loans, are also going to become bad debt. There might be no such thing as good debt pretty soon.

25:40And that's an AI story. So just by, I guess, kind of a side point, but because you do Noble Mobile, what do you think of, first of all, SpaceX, the company? I mean, this is one of the young people, if there's anything that they do like and seem to be invested in. It's the Elon Musk empire. So maybe they think he's the one who can help kind of shake us out of our malaise and build that future. And right now they're coming after reportedly maybe Boost Mobile as they push further into the mobile phone space, a space that you're in. What do you make of those ambitions? Yeah, I'm fascinated by it, like everyone else.

26:15The truth is Americans are spending 83 a month right now on our wireless. And in Europe, that's$35 a month. That delta comes to an extra$100 billion a year in wireless spend. A lot of people watching this are like, oh, what do I spend? And so what Elon's doing is going to drive prices down. What we're doing at Noble Mobile is driving prices down. I think the prices are going to come down. And I think that it's going to be tougher and tougher for Verizon and AT &T in particular to be paying out, let's call it$18 billion a year in dividends, which is the only reason why anyone holds their stock.

26:49These companies aren't really saying we're growing, we're growing. They're saying we're taking the cash and giving it to shareholders. And I think that's going to be tougher as more and more Americans question why they're paying over$100 a month for what has become very quickly a commodity. And we'll see if deflation is coming for your phone bill, which is one area where I know people would maybe appreciate it, maybe less so, the phone providers. Andrew, thanks. Appreciate it tonight. Not tonight. I'm already thinking ahead to election results. No, no, it's already tonight for a lot of us. Thanks for having me.

27:19It's a big day. Andrew Yang. Take care. All right, let's get now over to Julia Boorstin with a CNBC news update. Brian, Israel has reportedly warned the U.S. that Iran is considering using chemical weapons against its adversaries. According to The New York Times, reaction to the alleged intelligence is split between officials who think the threat should be taken seriously and others who think it's part of an Israeli pressure campaign to persuade the U.S. to return to major combat operations against Iran. The convicted murderer who escaped by slipping through the fence of a Tennessee prison was recaptured today after more than a week on the run.

27:57Tennessee officials say 28-year-old Jacob Morley was taken into custody near Kansas City, Missouri. At the time of his escape, he was serving a life sentence for killing his co-worker in 2022. And First Lady Melania Trump says Russian and Ukrainian representatives will meet at the White House on Thursday. She will deliver remarks about the local ceasefire she helped broker for the front line. Russian-occupied city Olshki, the truce allowed some 800 people to evacuate the battered city. It expired on Sunday. Brian, back over to you. All right, Julia Borson. Julia, thank you very much. All right, coming up after the break, another biggie, the always outspoken Barry Sternlich will join us exclusively.

28:38Possibly we'll talk rates, real estate, the real economy, and heck, whatever else is on Barry's mind.

29:08Try YouTube Premium for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel any time. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud.

29:44Check response, subscription required. You know, Kevin, sometimes I feel like computers are the only thing around here that are getting smarter. Yeah, my model hasn't had an update in a while. But that changes now. We think that we can smarten these listeners up about all things related to this crazy new future. Welcome to Machine Gods, a new NPR podcast that will be your guide to the AI future. Twice a week, we're going to help you get smarter about AI so you know what's real, what's hype, and what you should probably install on your phone. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

30:22All right, with voters heading to the polls, we are checking in on what today's races could mean for interest rates, the economy and real estate. And your next guest, one of the biggest names in the business in the world. Joining us now for an exclusive interview is Barry Stern. He is chair and CEO of Starwood Capital Group. Barry, it's really great to have you on Power Lunch. Kelly and I are super pumped about this. I'm just going to jump right into it. Does the outcome on a federal or state's level of today's midterm change the way you and Starwood Capital will invest?

30:58Good afternoon. Hi. Hello. Good to see you guys. I heard that introduction, so now I have to come up with something brilliant. You know, it won't change Kevin Walsh's position in the Treasury and the Fed. And I think Warsh is more important to us at the moment than the outcome of the election, except for something you've been talking about today, which is the governor races and data centers. We'll get back to that. Let's go back to Warsh for a second. I mean, Kevin is using one tool, interest rates, and trying to raise rates to slow the economy. I have to say, if you want me to be controversial, I would say it's the wrong medicine for this economy.

31:32It's not going to have any impact. It won't open the Straits of Hormuz. It won't on its own slow down AI spending, which is driving GDP growth. That's going to happen now, not because Kevin raised rates, but because the credit markets are having agita. And we're getting worried about these moratoriums which are taking place all over the country. So the economy should slow, but not because of Kevin raising rates. Also, we added 5.2 million jobs since they raised rates, 500 basis points in May of 22. In the service economies like education, health care, government, 5 million jobs were added. So clearly it has no impact at all on job creation in the heart of our economy, which is a service economy.

32:10There are 160 million jobs in the country and only 12 million are in manufacturing. It could hurt manufacturing. It'll definitely hurt the housing market. It'll definitely hurt the property markets. And I think that has the adverse outcome of having a shortage of housing, which will mean in the future rents will go up and home prices will go up. And that is one third of CPI. So it's actually doing the opposite of what he wants. It will create a housing crisis and it will reduce supply and future growth. And housing prices and in rents will cause future inflation. And it won't change government spending.

32:43That's$7.6 trillion. The government is spending money hand over fist. It's not going to encourage foreign buyers of our debt. We've kind of pissed off most of the world. So we have too much supply. And we're the biggest victim of that because the government has the largest interest bill. So if you keep raising rates, you're impacting the federal government's your biggest victim. They got to pay more and more interest expense on an ever rising deficit. So I think from that perspective, I don't think this election, I think it's a great opportunity for the country. I think if there is a blue wave, I would hope that for the 28th election, we could find a centrist.

33:19I do think that the rancor of the election and the Republican and Democrats is impacting consumer confidence. Consumer confidence is wildly low, right? And it doesn't make much sense given that we keep hearing how booming the economy is. The economy is booming narrowly. It's booming in AI and tech spend. And a lot of people think the data center is just going to get the rich richer and they're going to lose their jobs. So I think we need to go to the middle. And I hope the notice of this election might be he who goes to the middle wins. Half the nation is roughly half the nation's independent.

33:53And it's not driven by the far left or the far right, but that is what we feel like we're choosing between. And it's kind of upsetting everyone. And the very relevant thing for us will be the changing governors, particularly you mentioned Texas. And if Texas goes down to the crowd, the stock market may have an adjustment because that is where most of the power is and the free estate to basically continue the AI agentic search and get the data centers you need to compete with China. So I think the narrative of the industry has done a horrible job. We are a big player in data centers ourselves globally, both in Asia, Europe and the US.

34:27And I'd say, you know, we're trying to focus on, well, maybe some of these, this demand will go to Europe, to our data centers in Ireland or in Milan, or over to Asia, to our data centers in Japan, Malaysia and Australia. So it's not good for the US. And there's so much misconception and so much distrust. But some of the stuff we're doing requires no water. And everyone's pretty happy to keep consumer rates flat. But we do need to keep going on this AI race because it is an issue of national security, particularly with China's continued march in this debate. So I think it's going to be a very interesting evening.

35:07And nobody knows who's going to vote, so I don't think anyone knows what the outcome is. You ask him a simple question, and you get a grand theory of everything. He just does this off the top of his head. So Don Slaman is an electrician. He runs the union in Northern Virginia. And he was on the show earlier this week. He's trying to get the message. He said this is a once-in-a-generation opportunity for his electricians and people in those kinds of trades to get into the upper middle class. He's trying. He's in Loudoun County. He's trying to tell people, like, they're in his backyard. And he's saying, he goes, I want them all for me.

35:44He said, if they take them away from me, fine, but I want them all. It's just such a different message, I think, than most people are hearing from those who have direct experience with it. So, yeah, I think people got nervous about nuclear. I mean, the data centers are not a threat of their own. I do think it's going to slow, though. I don't think I think the market recently has adjusted for I was wondering, I gave a speech to our LP conference and said, you know, has anyone noticed the moratorium is popping up everywhere? If you just push the stuff out nine months, 12 months, 24 months, the discount rate, the market, the spending has to slow.

36:15And not only that, you'll probably see a lot of excess equipment on the market. You saw the check of Caterpillar the other day. I mean, there'll be too much equipment ordered. We all have to order equipment way before we get our data centers because it takes three years to get the data, the equipment. So we've all placed orders. We got our deposits down. And if they block these data centers, you probably see some equipment come back on the market, or at least either people default on their contracts or sell their position in line. And maybe those generators and coolers go off to Asia and to Europe.

36:46I mean, I think – and the other thing is the credits are good. I mean, other than Oracle, which is hovering on the edge, the slowdown is actually going to – if people really think the hyperscalers should not spend the money, their cash flow will go up. So selling these relatively low multiple stocks doesn't make a lot of sense. Barry, are you worried about Oracle and Corley's debt? Yeah, I think I'm worried about Oracle. And I think probably other than the election, the biggest event of the fourth quarter will be the Anthropic IPO. Because Oracle's revenue comes from a lot of it in the backlog is from OpenAI.

37:20And as goes OpenAI, goes Oracle. I don't think – OpenAI is committed to a lot of power. And I think the hyperscalers, I see Corweave up on the – and that's really hard. The credit – the AI cycle is going to slow because the neoscalers can't get access to capital. If Corweave's bonds are 15 percent, how on earth are they going to build a data center? Nobody is building a data center to a 15 percent yield on cost. So I do think you're going to have a slowdown in the economy. And the funny thing is I think Worsh is going to take credit for interest rates. It has nothing to do with that. It has to do with the engine of the GDP was the AI boom and the slowdown in GDP will come from the AI slowdown.

38:02Most of these governors are saying they will have data centers. They just want to study them. And I think we'll all have to prove that we don't increase consumer rates, that we're not destroying the environment, and that we're responsible. And they don't make much noise or any noise, especially the ones that are not near any homes. And the markets will sort it out. And this is going to be great. But I will say one other thing. I'm sorry to jump in on you, my man, but, you know, I apologize for interrupting. But what you're saying is really important. We look at the debts of some of these companies and I look at the equities of some of these companies that are down 40 and 50 percent in a matter of months.

38:41It appears to me and probably Kelly, too, and I don't want words to your mouth, Kelly, that the market is telling a story that the politicians can say what they want. but the market is telling the story. What story is it telling? I think it's telling you that the neoscalers are maybe some of them will fail. Now they do have existing power, which is going to be all that more valuable because there won't be any extra power. So perhaps somebody will buy CoreWeave and when those Microsoft leases expire in four years, they'll take the power away from Microsoft. Maybe Microsoft will buy them. So they do have a big footprint.

39:20That's actually live, but they have a larger pipeline that they probably can't finance right now. And I think, again, I think if you talk about the government selection, somebody needs to focus on the issues that really matter to this country. And one of them will be education, because if, in fact, this AI boom is real, you know, everyone, we're all debating whether it's going to be job losses or not. You saw Microsoft layoff or offer 25 percent of the workforce to quit. Today, you saw Disney. I think the government's going to have to pay attention to getting people trained for the new world that's coming at us.

39:55And a lot of my friends in the Valley say, oh, you know, it's going to be fine. Everyone's going to have a job. Well, the Industrial Revolution took 100 years to take place. This AI revolution might take 10. And we're going to need both blue-collar jobs and white-collar jobs will be changed, but they're not trained for them. And we have a national crisis in education. You really like to see the government focus on things like that that really matter to the average American. And so he can enjoy this economy, enjoy the capitalist system, have a great dream and continue to make the U.S. the most prosperous nation in the world.

40:27So I think we've got to change the narrative in Washington and focus on things that matter. One of the bigger things that's happened is the Trump accounts and then this talk. And we'll see if there's follow through of Elon Musk donating SpaceX shares. And, you know, should Anthropic do the same? And this idea of getting ownership of these companies into more hands and, you know, into the hands of children who get—I'm just curious what you make of that. Do you think that will overall kind of—yeah? I think it's fantastic. And I hope Elon does that. I hope Anthropic does it. Brad Gerstner, Altimeter, and the team, Alex von Persenberg, who proposed this, is a genius idea.

41:06when America can get invested in our capital markets and the uniqueness of our economy and the genius of our people. I mean, obviously, one of the things I like to see is an improved immigration policy so we can get these geniuses here. I wonder if the future Sergei Bin and Larry Page aren't going to be allowed in the country. And we need them here. This has always been our strength, our diversity. So, I mean, we really got to fix Washington. And I think the American people are tired of what they're seeing. And hopefully, I mean, we'll see what happens today. We'll have an election in two years.

41:35will be a little more important than this one. But even if the Democrats go forward and take both the House and the Senate, even just the House, I hope they don't waste all their time impeaching Donald Trump or trying to. I think we should focus on, again, the things that matter to the ordinary American. And that's what you're hearing about in this election, affordability. I mean, you can't build affordable housing. We're trying. We're desperately trying to build affordable housing in the United States. And it is brutally hard. There are so many regulations. I've lost a lot of money personally trying to build affordable housing.

42:04What could we change to get more? We all want more homes. What can we change? What would Barry Sternlich change in the regulations to get more homes built? Oh, there's a million things. I mean, it is a compilation of grants. Start with one. We'll streamline the approval process, and we could build market rate apartments cheaper than affordable and let us just convert them to affordable and give us the, like, Florida and Texas eliminated real estate taxes if you converted your market rate apartments to affordable, And that was a great inducement to keep the assets as affordable. So there are a lot of, it's just with all the mouths that trough, building affordable housing is, I mean, it's incredible.

42:45We're building in Tucson at$400 ,000 a unit, an affordable project. If I was going to build it at market rate, it cost me$250 ,000. How is that possible? If I hadn't seen it myself, I would have never believed it. But it's just broken. The system is totally broken. and it just needs a total overhaul and the right incentives in place to create lots of housing. We need lots of housing. And for Americans to turn now, they turn 40 before they buy a house. I mean, that's the American dream gone awry. And the wealth of this nation has to get from the elderly to the young generation, which is still buried in student debt.

43:16We need a lot of work on this economy, and the nation is not happy. And it will impact consumer spending, which will slow down the economy. We need to get this nation on a better track. and focus on things that really do matter. Well, Barry, thank you. And they did pass that, I forget the name of it, but the act that is meant to help with some of those housing processes. So we'll see. Maybe there are some... What's wrong with that? It didn't go far enough? What, did you want something different? There you go. You wanted something else. I thought it had everything in there that you're talking about.

43:46Well, I mean, you know, it's sort of like, you know, in the financial crisis, we lowered interest rates for the banks to zero and they could borrow and repot. But we should have student loans at zero. Like people shouldn't have to pay to get educated because the government can tie their income for the rest of their lives. Let them get educated. Let's help them get educated. Then we can tax them and get the revenues. The opposite is they don't go to school. They take jobs. They're not happy. They're hourly workers. They don't believe in our system. We have to change a lot of things. And we'll get there.

44:18Andrew Yang was on. Zero student loans. Andrew Yang should take that. Yeah, I think the Yang Stern-like ticket. Invest in yourself. Invest in the future. Some interesting bedfellows today, Barry. Thank you. It's been great to have you on. My pleasure. Good luck. Very certainly. I hope everyone's well and everyone votes. Appreciate it. Thank you. Good to see you. Coming up, gas prices are fueling some concerns among voters' minds on Election Day today. We'll talk about that and where that Russian ship of diesel is headed to the U.S. or somewhere else. We'll track its course after the break.

44:57All right, on Power Insider right now, we've got to focus on that Russian diesel ship that is headed to the U.S. Or is the ship headed to the U.S.? It's called the Agui Fernandez, kind of an odd name. It left Russia. We've been showing you the map. It's on its way to the United States. Well, now, Kelly, our friends at Kipler tell us that the ship's destination has changed from New York to for order, meaning that ship with Russian diesel may never make it to the United States. It may still, or it may go to Brazil, may go back to Russia, may go somewhere else. A new buyer could step in. If you're a U.S.

45:33company, let me ask you this, Kelly. If you're a U.S. company, and even if you need that diesel, would you buy the Russian diesel? And this was the shipment and the Russian diesel that Trump made not such a big deal about. I think the reaction was that this is a big deal. It's in the middle of the Russia-Ukraine war. He's relaxing sanctions so that that diesel can come in and lower our prices, right? And now the ship is not coming? Well, we don't know. It may still come, but it's listed as for order. We'll see where it ends up. Stay tuned. I don't know. We're going to watch that ship. Who needs it the most?

46:04More Power Lunch after this break.

46:09Well, I'm excited for AMD earnings after the bell. I'm excited to fly to Europe tonight. Are you? Yes. And you're doing the show from Europe tomorrow? Maybe. Thanks for watching Power Lunch. Closing bell starts now. Something amazing is happening. Despite a citywide blackout, this company is still up and running. That's because CDW deployed and managed a cost-effective Eaton Triplight Series SmartPro UPS to safeguard equipment easily and reliably. Keep the power on and protect your IT equipment from electrical challenges. Triplight by Eaton and CDW. Make amazing happen. Find out more at cdw.com.