Midterm Market Rally, Texas Data Center Fallout & Crypto Regulation

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1:05Stocks are surging as investors price in a historic midterm election and start sorting through what it could mean for the markets, the economy and your money. Welcome to Power Lunch. I'm Kelly Evans alongside Dominic Chu. Brian Sullivan will join us a little bit later. Here is where we stand this hour. The Dow soaring up 1 ,500 points. The S &P and Nasdaq sharply higher as well. Healthcare, financials and consumer staples hitting record highs, even with mega cap tech leading the way. We're bringing you the leaders, the laggards and the stocks that our guests need to be. They should. OK, Dom, go on your playlist, on your watch list or playlist.

1:41Either one of those things, Kelly. Plus the shake up in the Lone Star State. Texas's red hot data center industry has been plunged into uncertainty by governor elect Gina Hinojosa's pledge to crack down on the rapid growth of those server warehouse projects. Some of the names that you see there at the center of the AI build are getting hit. I mean, hit hard. Cypher, Vistra, Quanta Services, GE Vernova, among others, all down double digits. One straw, one straw, one, well, I got you. You get contagious. One Wall Street analyst follows this space closely. He's going to break down the names to watch.

2:17Morgan Stanley's head of thematic and sustainability research, Stephen Byrd, is actually here with us, Kel. And we're seeing a ton of green on our screens as almost everything outside of industrials, energy, and utilities are tracking for big gains. Let's show some of those names here. The home builders, the construction companies up to, I'm sorry, the home building construction companies up today, 8 % gain for Horton. Bunch of the consumer discretionary names too. And of course, some stunning moves in mega cap tech. Apple, Microsoft, and Amazon rising to the tune for Amazon of 7 % this hour. So what do these moves mean?

2:51Here on set with us on this big day is Citi's head of equity trading strategy, Stuart Kaiser. And Freedom Capital Markets chief market strategist, Jay Woods, is here as well. He's a CNBC contributor. Welcome to you both. Stuart, your thoughts, your reaction. What's this market telling us? I think the market is telling you that a lot of bad news was already priced in coming in. If you look at the polls with the prediction markets, they were all kind of signaling a dem sweep of some degree. I think folks were positioned for that. You know, earnings have been smushy, I guess, at best. They haven't been great.

3:21So that's kind of a win in the markets as well. So I think what you're seeing today is in the overnight market sold off. Once they recovered, I think folks were thinking, geez, I don't own enough. And this was already kind of largely discounted in the price. So we've seen people moving back into equities. But as you just highlighted, they're sort of staying away from some very select areas that they view as most negatively impacted by the election. The question everyone's weighing in on is to what extent do you really think data centers will slow? Because the caterpillar analyst we just spoke to worried about this a few months ago.

3:49The stock's down 30 percent. It's down 6.5 percent today. So he's got the granularity to say it's a real thing. But everyone else looking at this top level is saying, nah, it's not really going to slow it that much. I mean, look, we love the power gen trade, the AI power trade. We took that off back in September just because we viewed the political headline risk as just too much to bear. I think you raised an interesting question. I mean, it's easy to say stop the data spending. Now you're the governor, though, of a state and you own that economy. And the more you slow the spending, theoretically, the more you put pressure on the blue collar workers in your state and the investment story that's going not only in your state, but nationally as well as globally.

4:27So I think there is a little bit of skepticism about how much they can pull back just because of how important this is to growth. But clearly, as you mentioned earlier, folks are discounting the risk of that happening on a go-forward basis. The interesting part about this is, and a lot of people have spoken about this in the wake of the price action that we saw in futures overnight, you harken back to 2016 elections when there was a highly publicized story about Carl Icahn leaving the party he was at to go and tell all of his traders to buy everything they possibly could. And we saw the markets rally there.

4:59Does this kind of price action akin to what we saw in 2016 mean that overall the U.S. economy and markets are on solid-ish footing if there is that kind of reflex to buy the dip on an election-based catalyst? Look, I think that's the big debate. I mean, if you look at our earnings season, for instance, These companies are posting double-digit EPS growth on a year-on-year basis. The economy is pretty strong, 4.2 % unemployment, et cetera. That growth story is the only thing that's been protecting equity markets from wider credit spreads, higher yields, and higher oil prices, right? So you've had a very tricky kind of balancing act right here.

5:33I think what you're seeing today is people were under-positioned, and they're basically telling you, yeah, there is some risk to the outlook, but the outlook is strong enough that I kind of want to still have some exposure to it. The big question clients are asking, though, is this year you had call it 30 percent EPS growth. That was enough to balance out all of those macro risks. Next year, that EPS growth, let's say, let's say slows to 15. Is 15 enough to kind of continue balancing this stuff out? And I think the number one challenge people are curious about on that front is the credit side.

6:04The capital demand we've seen in the last two weeks is three, four, five hundred billion dollars. You're seeing credit spreads wide. So there's one thing I think people are asking is, how do we deal with that huge demand for capital at a time when earnings is also kind of on a year-on-year basis decelerating? Jay Woods, I am curious if you think the market action today gives people some buying opportunities, for instance, in semis or in neoclouds or wherever it is that's kind of bearing the brunt of this, even in the likes of Caterpillar. Oh, Caterpillar, without a doubt. If we bought this and back it out and you look back six months, 12 months from now, this is a stock on sale that is worth putting in.

6:44It's a core holding in my own personal portfolio. And I think I'm going to have to buy more after seeing this dip today. But I want to go back to Dom's point, the 2016 election. When I look at what's going on right now, I look at the 2018 midterm, which was Trump 1.0. All right. What happened? They just lost the House and we rallied after that election. And then we went back down. We went down for another six to eight weeks. What was the backdrop then? Well, we had a trade war with China. Now we have a real war with Iran. Still not going away. Nothing has changed because of what happened in the election last night.

7:18And then we have a Fed hiking rates. He was going at Jerome Powell. Let's see what he does if we hike rates in December. It was December 11th in 2018, December 9th now. And then we had a government shutdown. That was the low of the whole sell off. But we panicked going into another hike and we panicked going into a shutdown. And those things are on the horizon. So this goodwill, this nice rally, we have certainty. There's no contested election. That's good news. But there are still things going. And Trump has been an X factor. We don't know what he's going to say. So to me, this is nice rally, a relief rally in some of these names beaten down.

7:56I do like the financials making new highs. New highs are a great thing. But the semis still going to lead this market. And right now we're still seeing breakdowns there. So if that's the case, Jay, then should we use this as an opportunity or is it are we better off now waiting? Should retail investors wait for a few weeks, months, quarters before they feel like there is any kind of clarity? And I say that knowing that anytime there is clarity, the ship has already sailed and the returns have already been made. Yeah, no, this is when you get that shopping list ready and Caterpillar is on it. And I think we should go shopping on some of these beat down names.

8:30And we talk about the A.I. build and the flip in Texas. Abbott was saying the same thing. He wanted to slow it down. They want some regulation. This is a speed bump. It is not the end of the road. Far from it. If Texas is foolish enough to say not in our state, there are 49 other states that should be lining up to take that business away. The thought of going to space and putting a data center there is phenomenal. It's not going to happen in the next decade. I just can't see that. You know, how are they going to repair a data center when there's a tech problem there, too? But what we want to see now is that shopping list.

9:02And these semiconductor names that have been beaten down, continue to be beaten down, look good. Google, nice relief rally. Amazon, get back in this name. We were worried about free cash flow. Well, they're not going to be spending a lot of cash immediately over the next few quarters on these data center builds. So this is going to be good for their bottom line. Microsoft and Apple, the two big stories of the day, making new highs. Their earnings were phenomenal. They sold off. So this is good leadership. Is it enough to take us to 7 ,800, the key level of watch in this S &P 500, over the next few weeks?

9:34I don't think so. So I think we're going to get some pullbacks. And if we get an overreaction in these data center names, it is time to start buying them because the story is far from over. It was Amazon that Brian Nowak told us. I think yesterday, maybe the day before, Don, was his favorite name of kind of the big cap tech name. So, Stuart, just kind of put a pin in this for us. We haven't talked a lot about the price of oil. That was really the driving factor as well, not just AI, since March. Can we say it's on the back burner now? WTI is at 87. Can you take that to the bank? I would say the oil thing is very interesting.

10:10I think equity investors are in a fool me three or four times. Shame on me at this point. So I do think oil is sort of a secondary risk for equity markets at this point. Though, if you talk to any macro investors, it's number one. I think for equity investors, they probably listed as number three or four, frankly, relative to the other things we've talked about. Higher yields, wider credit spreads, you know, finance, financing demands, et cetera. You know, to what Jay said, I largely agree. I think this was a positioning driven relief rally. I do think you want to be putting your shopping list together.

10:38But I think the Democrats are going to feel emboldened here. And you're facing some headline risk over the course of the next few weeks. So I do think you want to be very disciplined about when you're buying these stocks and when you're entering into them. So put the list together, but maybe not go shopping today. I don't know if you can tell us what's on your list. Jay could tell us what's on his. I mean, can you give us some hints? Look, I think you want to look. He mentioned a few things. One of the things that the election was holding back, it was the AI power trade. It was parts of health care, and it was banks and financials.

11:04So I think those should be the three, if you're expecting election relief, that you want to be kind of putting your money to work in. All right, gentlemen, thanks. Really appreciate it. Stuart Kaiser of Citi and Jay Woods of Freedom. capital markets. All right. It's not just the stock market seeing that bid post midterm elections. The bond market is also seeing a move higher in prices and a subsequent drop in yields. The benchmark 10 year note goes, you can see there has fallen to below four point nine percent. And we're seeing falling yields pretty much across the entire maturity spectrum for the treasury yield curve.

11:33Shorter term one and two month bills to the 30 year long bond as well. Traders right now are still sifting through various storylines about what that Democratic sweep in Congress might mean for rates. One view that's getting more traction in today's trade is that the blue wave could result in a better fiscal outlook, right? Because a divided government is less likely to be able to push through legislation that would expand deficits. So keep an eye on that for the bond report there. We're just getting started on the show. Democrats are riding a resounding midterm wave, but how far will the ripple effects reach?

12:04Plus a major upset in the Texas governor's race. Democrat Gina Hinojosa defeats three-term incumbent Republican Governor Greg Abbott. What could that shift mean for the state's massive data center ambitions? Morgan Stanley's Stephen Byrd is going to weigh in coming up next. And with health care hitting another record, how could the blue wave shape that sector? That story is also coming up. Keep it right here.

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13:52All right, Wall Street has seen some healthy returns today. The S &P healthcare sector hitting an all-time high after yesterday's midterm election results. Some of the biggest gains are coming from hospital operator HCA Healthcare up more than 10 percent and insurers like Centene and Molina Health up about 10 and 7 percent respectively. All three draw large revenue from government programs. Another key part of the health care policy picture going forward could be drug pricing. Here to help us break all of that down is Asad Haider. He's the head of U.S. health care equity research over at Goldman Sachs.

14:26And Asad, this is it's timely to have you here right now, because this is one of those sectors that will be a huge focus for Main Street and Wall Street in the wake of that blue wave sweeping through Congress. I wonder, now that you've had maybe five or six hours to kind of digest everything, what exactly is the big picture outlook that you have for the sector, given what we just saw at Washington? Yeah, Dom, thanks for having me. So I think there's a couple of things going on, right, in terms of just the narrative today. And I think we've got to be very careful about separating the narrative from the actual outcome.

14:56And, you know, I'm not going to take any view on sort of where the outcome ends up being, but I think you can see from the price action, as you mentioned, the XLV or the healthcare sector is hitting new all-time highs. A lot of that is coming from some of the Medicaid insurers and the hospitals and the utilization exposed names. But some of it is also exogenous. I think the fact that, you know, you guys were talking about this in the segment before this, semis being weak, has been part of, you know, the dynamic that's also played out in healthcare as well, where you've seen these rotational dynamics between, call it, you know, the AI capex trade versus other parts of the market of which healthcare has been a beneficiary.

15:29You know, specifically from the policy side in healthcare, I think there's a few things that people are considering today. Number one, I think there is a repricing of some extent to, you know, risks of OBBB. Now we'll see whether that happens or not, but I think that there is a view that the market seems to be taking, as you can see in the price action, that some of the cuts that the Trump administration has proposed to hospitals and, you know, trying to curtail Medicaid expansion, et cetera, are probably off the table. Now, whether that happens or not remains to be seen, but that seems to be getting priced in.

16:05And that's why you're seeing the stale wind, like you said, to the Medicaid insurers and the hospitals and even MedTech, some of the utilization exposed names. You're also seeing some of the vaccine names, you know, rally on the back of this. So that's something that I think the market is also potentially considering. As it relates to drug pricing and pharmaceuticals, you know, this election, whereas, you know, drug pricing and healthcare affordability is always a consideration in any election cycle. I think this election cycle was sort of unique where it is well understood and likely reflected in equity prices that drug pricing is in fact bipartisan.

16:40You've got, you know, MFN on one side, you've got IRA on the other side. And I think the question now is, just given the sweep that you've seen, that you're probably headed into legislative gridlock to some extent in the near term. And so near-term risks on things like codification of MFN. I think the market is seeing that risk as potentially off the table. And then what happens in 2028 as it relates to IRA expansion from the Democrats remains to be seen. We're still far away from that. But I think the combination of those exogenous and endogenous variables are what's playing into the sector. Would you cover like CVS in this whole, you know, they're buying Aetna and then they're spinning it out again.

17:17And maybe that's outside your kind of core bailiwick. But one place to look at is obviously just the core pharma companies like Lilly. What are the biggest risks? I guess the point is to the market today, like they don't really see a lot of them at this point. It's just innovation continues apace. Absolutely, Kelly. I mean, I think so there is that exogenous dynamic that I mentioned, you know, the other side of the AI trade, et cetera. But I think operationally, you could also say that the pharma industry has actually been on pretty strong footing year to date. And I mean, if you look at just earning season, you know, we're sort of coming up at the end of third quarter earning season right now.

17:52And similar to the second quarter earning season, you are seeing a consistency of revenue beats. And for the most part, for the large-cap pharmaceutical companies, and also top-line guidance raises. So, operationally, things seem to be going well in the right direction. And then there's a lot of innovation, of course. I mean, you know, we've all talked about cancer vaccines, and that's been a big, you know, a big thing that sort of grabbed generalist psychology. And there's a lot of innovation going on in other areas of oncology and, you know, broadly as well, immunology, et cetera, that I think the market's getting more and more excited about.

18:22And so the result of all of that has been this consistent multiple expansion over the course of, call it, the last 12 months. So a year ago, for example, when Albert Dula from Pfizer struck the first MFN deal with President and Trump, the healthcare sector, the pharma sector was trading at about a 40 % discount to the S &P. That discount at the beginning of this year had narrowed to 27%. As of 10 days ago, it was at about 5 % to 7%. And, you know, as of earlier this week, and maybe today, you're now at parity with the S &P. So we're now getting questions on, you know, looking at examining the periods when pharma actually used to trade at a premium to the S &P over the last, you know, sort of 30 years, there have been episodes of that.

19:00And three things really need to hold true. One, concerns about the broader economic environment. Two, confidence in innovation and product cycles. And three, diminished concerns around policy risks. And to some extent, you could argue that all three of those hold true today. And then the operational environment has also been pretty strong, as we said, based on third quarter earnings. So, I mean, it sounds good. There's not a lot of risk here. Like you said, the risk was really more a year ago. And now the stocks have cleared that event and have the earnings to show for it. Asad, thanks so much.

19:31Appreciate you coming in today. Thank you for having me. Asad Haider with Goldman Sachs. Coming up, blue wave, new rules, what the midterms mean for policy and your money. Wolf Research's Tobin Marcus weighs in beyond healthcare. Next.

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21:22Welcome back to Power Lunch. President Trump is weighing in after Democrats flipped control of the House and the Senate. Our Eamon Javers has the latest, Eamon. Dom, that's right. President Trump took reporters on a guided tour of the new White House ballroom construction site this afternoon, where workers were participating in a topping off ceremony. As the president pointed out the location for new chandeliers, he took some questions from reporters on the election. He acknowledged Vice President J.D. Vance's statement earlier today that the Iran war may have cost Republicans the election, but he insisted that it was worth the cost.

21:59I know how he feels about it. I think it was I think it was fine. Yeah, I thought it was good. We knew that. I know that. I knew that when I went in and we stopped them from having a nuclear weapon and they will never have a nuclear weapon. Now, for his part, Vice President J.D. Vance posted an analysis on social media on what voters want from the Republican Party now, including, he said, according to a pollster he talked to, one, end the war, two, focus on the cost of living and inflation, three, put America first, and four, and this is an interesting one, change our relationship to Israel. and asked about the vice president's comments, Trump said, maybe he won't run.

22:39I don't know who's going to run, but I can tell you that as far as that war is concerned, I would have done nothing different. So guys, the end of this election cycle always marks the beginning of the next one. And so interesting to see now the 2028 potential presidential candidates begin to position themselves. J.D. Vance, you know, staking out here more of a populist isolationist line. Maybe he sees a through line from where he is now to the presidential nomination in 2028. Although, Aiman, I don't know if you caught it last hour, but Bradley Tusk and others are saying this too, thought that Vance himself was perhaps one of the biggest losers from the last 24 hours.

23:14I think there's no question of that, right? I mean, the president is historically unpopular, and J.D. Vance is his vice president, so he's going to bear the political weight of that going into 28. The question is, can he do something to shake that off and change the script? Right, and not just that, maybe some of the candidates that he had supported, to be back and so forth. But anyway, time will tell. Eamon, thank you. Eamon Javers, appreciate it. As the dust settles on the last few remaining Senate and House races, what are the key implications for Capitol Hill over the next two years and beyond?

23:45Our next guest says, don't count out President Trump. We'll see what that means. Wolf Research's Tobin Marcus joins us now. Tobin, it's good to see you. Kit goes off. I mean, you've probably heard a lot of the different takes so far today. Where do you differ from people? Hi, Kelly. Thanks for having me. So from a policy perspective, in terms of what the next couple of years will look like before we turn to markets, I do think that despite the rebuke that President Trump got from voters last night, he's going to remain very, very influential within the Republican Party in particular. For most members of Congress, the only real threat to their political career is a primary challenge.

24:18And I think he's going to be perfectly capable of generating threatening primary challenges based on where his popularity is among Republican primary voters. So he's not going to be, you know, such a diminished lame duck that he fades into irrelevance. He has a lot of executive powers and a lot of political influence. And it's, you know, Democrats are going to have to continue contending with him. Anything that happens in Congress is going to need to be bipartisan. And I think getting to some of those bipartisan deals will be challenging in an acrimonious environment. Hey, Tobin, it's Dom. One of the things that we've heard over the course of the last maybe 10 or 12 hours or so is this kind of maybe idea that President Trump in the final two years of his presidential term will become Mr.

24:57Vito. And I wonder from your standpoint, what exactly is the odds of something like that happening? And is it good or bad for either side in Congress or in the White House to be viewed as being that adversarial among future policy? I think both Democrats and President Trump have a big conceptual choice to make about the extent to which they're going to be orienting themselves around seeking elective bipartisan deals on issues that they could just do nothing on. Democrats have an ambitious agenda, for example, rolling back a lot of the health care cuts that were enacted in the big, beautiful bill.

25:32That's going to be kind of a nonstarter for President Trump. You know, but on some of these issues like drug pricing, as you were talking about in the previous segment, you know, that's something where they could try to reach across the aisle and figure something out, or they could just not. I would bet on less rather than more action. I think President Trump signaling since we started getting clear results last night has been a little bit all over the place. He's made some references to working together with Democrats. He's also talked a lot about vetoing. And so I think we will get both. But for the most part, when we get big legislative outcomes out of Congress, I think it probably is going to require some sort of forcing event or a source of leverage.

26:04So we are quite focused on the debt ceiling showdown next year. I think that's more likely to generate a healthcare deal than both parties just sort of sitting down in a spirit of goodwill in Q1. Yeah, absolutely. Everyone's talking about the debt ceiling already. So here we go. Brush off the debt ceiling playbooks. Tobin, what else? Where do you think? I mean, is it impactful, the slowing down potentially of AI data centers? I'm relatively sanguine about what's going to to happen to the actual pace of activity on the data center side. And so I think I would tend to fade some of the moves that we're seeing today with, you know, semis selling off and hyperscalers recovering based on, I think, sort of an expectation that their free cash flow is going to look better if the arms race has been ended by policy intervention at the state and local level.

26:46Despite all the backlash, despite the proposals for moratoria from various different governors who won last night, the message that we're seeing across the board is build it right rather than don't build it at all. Everybody is saying, even the most strident anti-data center critics are saying, we want conditions, new rules on water and power and maybe union labor and prohibitions on tax breaks and NDAs and so forth. They're not saying, we don't want data centers in our state. And so I think there still is going to be a sort of a market clearing price to sweeten the deal enough for communities to say yes to these projects.

27:18I think there are going to be places for them to get built. We'll have some uncertainty about the earlier phases of the permitting pipeline. But I think we have enough projects in the queue that we can absorb a little bit of a delay there and still maintain a good pace of activity. All right. Tobin Marcus, thank you very much for the thoughts. We appreciate it. Wolf Research is head of U.S. policy and politics. Let's now get over to Frank Holland for a CNBC News update. Good afternoon, Frank. Good afternoon to you, Dom. The sheriff's office in Hillsborough County, Florida, says a suspect and one victim are now dead following a shooting today at the Citibank corporate campus near Tampa.

27:50Authorities are calling that shooting a targeted incident. The sheriff's office says it's now clearing the building. Authorities in Florida say a helicopter carrying three people crashed into Biscayne Bay near Miami today. The Coast Guard says one person died and two others were taken to a local hospital. The National Transportation Safety Board says preliminary information shows the helicopter was on a photography flight. And Detroit Lions linebacker Jack Campbell says he has a he has full movement in his lower body after he suffered a neck injury in the fourth quarter of Sunday's game against the Vikings.

28:19It's his first comment since that incident. He says he's going to continue making progress with movement in his upper body. He says he's staying positive and focus, focusing on getting better. Dom, back over to you. All right. Thank you very much for that, Frank. Up next, Brian Sullivan is going to join us to discuss some of the big moves and energy from a remote location. Brian. Yeah, Dom, we're going to explain why we are in Rome, Italy. That is the Coliseum behind us. It'll make sense when we tell you. And also we're going to give you the two names, the two people in Texas that may be the most important people for data centers.

28:52And they are not the governor or the governor elect. That is next on Power Lunch.

29:03Welcome back to Power Lunch. Believe it or not, the energy sector is heading for its worst day of the year. This comes as talks about longer term energy policies are back on the table. Our Brian Sullivan is joining us live from Rome, Italy, ahead of a big day tomorrow. And Brian, there is obviously a lot going on, including more debate around Texas and its data center build out. But Texas to Rome, bring us and connect the dots. I'm going to connect the dots and explain why I'm here. We're not on vacation, although this is a lovely spot. That is the Coliseum. First off, OK, energy is down. Not all energy stocks are down on the election.

29:38There are some winners. Anything related, as I wrote in my newsletter, to say wind or solar or renewables or sort of clean or new energy is doing very well. You look at some of the winners out there, First Solar, Next Power, and others, they're actually up. So not everything is down. What is down big, however, are some of the names we're going to talk about in just one minute. That is sort of anything related to data centers. You've got names like Cypher Digital and Vistro, which is a big power company. You've got Iron, Nebius, Corweave, names that our viewers know, maybe trade, maybe own. Those stocks are getting hit.

30:12Although I would say this, it's not all on the election. We've been talking about these stocks going down for weeks. So either the market got ahead of the expected election results or it's just kind of a continued sell-off. We'll talk more about that in just one minute. Okay, a lot of debate about Texas and what governor-elect Gina Hinojosa is going to do or may not do. You've got Governor Abbott in office now, but I want to introduce you guys to two new names that maybe you've never heard that may be the most important names for data centers in Texas. The first one is Thomas Gleason. Who's that?

30:46Okay, he is the chairman of the Public Utilities Commission of Texas. He's also on the board of ERCOT, incredibly powerful for permitting around data centers. The next name, Brooke Pulp, P-A-U-P. Who's that? She is the chairwoman of the Texas Commission on Environmental Quality. Get to know those letters, TCEQ. They permit based on water and air quality, kind of a sleepy agency, until data centers get involved. If a data center wants to go off the grid, not be connected to the power grid, they're going to have to go through them to get the permitting. If they're on the grid, they've got to go through ERCOT and some others.

31:26And of course, Governor Abbott has already enacted a moratorium so they can analyze it more. So I think, is the market overreacting? We'll ask more in just one minute. All right. Why am I here in Rome, Italy? Because while we are not in Texas, we are bringing a bit of Texas to you. Because the ambassador to Italy and San Marino from the United States is CNBC friend Tillman Fertitta. And tomorrow we've got a live and exclusive interview with Ambassador Fertitta. arguably the most important business person in the state of Texas, one of the most important in the United States, and he's got his finger on the pulse of business here, business in America, the consumer across the United States.

32:07He is here. That is why we are here. And we're going to be speaking with him live and exclusively. And that makes sense of why we are in Italy. So now let's kind of talk about this data center conversation and keep it going and bring in Stephen Bird. He is the global head of thematic research at Morgan Stanley. Stephen, it's a rough day. I want to say this. I did get a comment from Cypher Digital. Their stock down about 20%. Thank you very much for taking some time. I know you're busy and joining us. Here's a quote from Cypher. Cypher remains committed to the tremendous growth opportunities we see for data centers in Texas.

32:42We congratulate Governor-elect Hinojosa, and we look forward to working with her administration to continue growing the data center economy in ways that are best for Texas. This is a stock and others have been going down for a month. Is the market getting something wrong about what might happen in Texas and across America? In the long term, yes. And I actually agree with your prior speaker who basically said, if you do data center development in the right way, I think you can have community support. But frankly, we have seen in many situations data center development done in the wrong way without community support.

33:19So when you look at what Governor-elect Hinojosa laid out, these are reasonable requests. Community involvement. Make sure you don't stress water resources. Make sure you're not increasing customer bills for power. But also, what's the net benefit? What are you bringing back to the community? But if you do it the right way, I do see a path forward. In Texas, though, we have a lot of half-baked, quarter-baked projects that really do need to be swept aside. And, you know, the process that the prior governor, Governor Abbott, has laid out and what Governor-electing Hossa laid out, I think will achieve that.

33:53So a long way to say, I do think the market is overreacting. There is a path forward. I understand this creates a lot of uncertainty. And the fear is that just no data centers will move forward in the U.S. I think that's just wrong. Well, I do wonder if it creates that uncertainty, because the point I tried to bring up, Stephen, was that if you're a data center not connected to the power grid, the public power grid, you just need to get through that TCEQ and get that air and water permitting. If you're on the grid, you've got to go through ERCOT. But Governor Abbott, the current governor, hasn't he already established a bit of a review period, a moratorium, if you will?

34:29So people I'm talking to are saying, well, what might the difference be between the new governor, Hosa, and Governor Abbott's current moratorium on data centers while they do some of these environmental reviews? I agree, Brian. I think that actually when you look at what Governor Lactino Hosa has laid out, Governor Abbott had laid out similar concerns. And so when you look at the process that Governor Abbott has today, to be frank, a lot of proposed data center projects will not meet that threshold, will be knocked out of the process. But others will move forward and will, for example, they will not impact water.

35:03They will not impact customer bills. That's a small set of projects, but it is a set of projects. So I do agree with you. When the dust settles, I think we will see a small percentage of Texas data center projects move forward. It will only be the highest quality projects where community support is there, benefits of the community is there. Several of the PowerShell companies that we cover are in that group that will move forward with some of those projects. So we've already seen like 20 or 30 percent, I think, of proposed data center projects get canceled. That's not about the election. That's just there were too many projects.

35:39There's not enough power. There's not enough power lines. There's not enough people. Okay. So how confident are you, Stephen, that the big ones, the ones that go to the public companies that you cover, are going to ultimately get built and those companies are ultimately going to get paid? Yeah, I have a completely different view than what the market is laying out today. I am confident that that small set of projects will move forward. But let's put this in the context, Brian, to your point. On a hot summer day, the usage of power in Texas is around 90 gigawatts. The state has received over 400 gigawatts of proposed data center projects.

36:15That's really not doable. It's very obvious it's not doable. Most of those projects need to be swept aside. That will happen. A small set will move forward. We focus on the companies that have the highest quality projects. Those will move forward. The market today is saying just the opposite. This is a classic opportunity of just overreaction. The market is assuming all projects get rejected. That's not the case. Let me give you an example in Louisiana. We're involved in some projects where the ultimate AI backers, the very large companies behind the growth in AI, are providing significant community benefits.

36:48So, for example, in one situation, teachers and members of police and fire are getting an$8 ,000 raise. That is part of the whole package that needs to be delivered. You need to provide that benefits. But if you do so in a smart way and you also make sure you're not having a damage to water usage, air quality, there's absolutely a path. That said, in Texas, it's a very small percentage of that over 400 gigawatts that will actually make it through that process. Stephen Byrd of Morgan Stanley. Stephen, I know you've been busy. These stocks have been selling off for the better part of a month, but we do appreciate you taking some time coming out, explaining what you believe the story to be.

37:26Thank you, Stephen Byrd of Morgan Stanley. Really appreciate that. Yep. So so, Kelly, obviously, the data center story is the story today. We're here also because tomorrow all day ahead of our interview with Ambassador Fertitta, we're going to talk about Europe's energy crisis five years in. I know you and I have been talking about this for going on four to five years. We'll hit more on that tomorrow and talk about how maybe this new Democrat Congress, which is coming in, could they try to change some of the LNG export rules that might impact Europe and some stocks as well? Big day tomorrow, big day today.

37:59And I'll send it back to you and Dom in the studio. I'm thinking about your evening in Rome. What suggestions do Dom and I have? You probably know them all. But Brian, thanks. It's a beautiful shot there, too, in front of the Coliseum. We'll catch you tomorrow, Brian Sullivan. Coming up, crypto bouncing back after the Democrats' midterm sweep. Could the blue wave bring a sea change in regulation for the worse? We'll talk about that.

38:29Welcome back to Power Lunch. It's not just the stock and bond markets that are rallying after the Democrats' big night, flipping both the House and the Senate. Cryptocurrencies led by Ether, also sharply higher. So what does the blue wave mean for the future of crypto regulation and investing? Let's bring in Matthew Siegel, the head of digital asset strategy over at VanEck. We saw movement, there's no doubt, in cryptocurrencies on the wave of the election results, but they weren't nearly as volatile as some people were expecting given the outcome that we saw. So how exactly do investors then navigate this kind of what do we know about regulations when we don't about a Democratic-led Congress vis-a-vis a Republican Trump-led White House?

39:12Yeah, I mean, take a step back. Elections are a time when markets price in the medium-term outlook in one day. So we shouldn't be surprised by some volatility. and the first move is not always the right move. But with that said, what we see today is Bitcoin and gold are outperforming and the Nasdaq or tech generally is underperforming due to some uncertainty around the AI build out. And the Nasdaq-Bitcoin correlation had been quite elevated in recent weeks. So it's somewhat affirming to see that breakdown. And I think part of it is on the election, you know, it's about now governing, not campaigning.

39:51and governing is about compromises. And the compromises that are going to have to be struck here around the debt ceiling, especially, are more likely now to result in spending and debt issuance. And that spending and debt issuance is going to alienate a good part of the electorate, and it's going to alienate some of our trading partners who object not only to the scale, but also the use of proceeds. Are we spending this money on good things or bad things? So we're actually quite bullish on Bitcoin here. And if you think about what's likely to not change over the next four years, Bitcoin stands out.

40:30All the regulation is set. Custody, it's regulated via the ETFs. Leverage, it's now regulated. Most of it is on the CME or on MicroStrategy's balance sheet. That's a big contrast to the last cycle when it was unregulated. And then on the adoption side, it continues to progress. Yes, it's lumpy. But yesterday we had Bhutan, a small country, but the third country ever to announce that they're putting Bitcoin on their central bank balance sheets as a monetary asset. You had Benjamin Netanyahu. You better guard it closely. The$6 billion heist. Let me just ask you about this, and I'm glad you're talking about the adoption.

41:04The bulls were also excited about this analogy to four years ago. Similar election results. Crypto faced the midterms. We had had the FTX collapse as well. It bottomed before rallying 300 % over the next four years. Again, we have a midterm year, the same Fed target range, this Binance heist that I was kind of mentioning. Is crypto setting up for another big run or were the conditions then more uniquely favorable? Yeah, we think it is. It's a cyclical asset. It follows this predictable four-year cycle. Based on that math, we would have seen a bottoming out in October. And if history is a guide, Democrats are perfectly fine for Bitcoin because there really is no regulatory uncertainty facing Bitcoin.

41:48Now, you can debate around the altcoins and tokenization and stablecoins, where I think the market might start to differentiate and look at some of the regulations that the SEC and CFTC has done and what might be reversed if the Democratic wave continues for the next four years. And I just want to call out before we go that you were emphasizing what Sully, Brian Sullivan was just reporting, which is that there's going to be a little window to possibly push through data center approvals in places like Texas before the newly elected take power. Yeah. So many of the Bitcoin miners are getting hammered today down 20 % plus because of this Texas-specific issue.

42:26And what we'd highlight there is that Bitcoin's intersection with the electrical grid, that value may actually be heightened now because a number of those miners may be sitting on some orphaned capacity here that they can't convert as fast as possible. They'll be able to mine Bitcoin. They have round-tripped a lot of these stocks since they first announced the pivot. There's a price at which it makes sense to mine Bitcoin instead of spending$15 million a megawatt to repurpose. So, you know, seeing some value in those stocks as well. Glad you mentioned that. Tough day for some of those areas. Matthew, thanks.

42:57Appreciate it. Matthew Siegel. Coming up, healthcare, financial, staples, setting new record staples today. Where's the value now? A trader weighs in after the break.

43:18One big name is falling today, down 2 % NVIDIA. Don't want to make too much of it, but it's on track for its fifth straight negative week, which would be its longest losing streak since 2022. Is our next guest buying the dip? My spidey sense tells me not yet. Chris Crisanti is MAI Capital Management's chief market strategist. We need to be down like a lot more than this, I think, Chris. But what are you buying right now? What are you holding? What are you staying away from? What do you think of the results? It's good to see you and Dom again. I think this sell the data center trade is a little too simplistic.

43:48So we are actually buying the power names today and actually lightening up on NVIDIA. For a while now, what I think is that the picks and shovels play is in the seventh or eighth inning. But the power play is in the second or third inning. And so when we get the opportunity to buy the power names down, in some cases, 10, 12 percent like they are today, we're taking advantage of that. And NVIDIA would have to go a bit lower for us to be interested there. So why Quanta? Why GE for Nova, Chris? You know, they're the high quality names in the specific power niches that they're in, Dom. And so we want to own the highest quality.

44:25We think that'll give us downside protection on volatile times. and I think they'll get the lion's share of contracts. And the important thing to remember is, look, there were anti-data center governors elected, but they are not gonna stop an industrial revolution. What's gonna end up happening is the data centers are gonna have to pony up more money and make important concessions. We think that happens and we think these guys continue to make a lot of money. Where else, Chris, are you seeing opportunities? You know, Kelly, I think it's important for your viewers to think it's earnings, not elections, at the end of the day are going to drive stocks.

45:04So unless there's special things that are happening, and in this case, the data centers are taking it on the chin, I would step back and just concentrate on where you think earnings growth will be the strongest. And so I would caution folks against thinking this election rally is going to last, you know, for a long time, unless there's earnings underpinning. We mentioned, Chris, that Staples making new highs, financials making new highs, you know, some of these key sectors, healthcare making new highs. From a sector perspective, do you feel defensive is better right now? No, actually, I think that the market can be strong into year end.

45:37I like healthcare. And as you guys know, I've liked it for about 18 months now and that's working. But I also think some of these hyperscalers have really been unfairly treated and risk reward. I think that's the best kind of tech trade you can make right now. The earnings are strong. They own the compute, which is the most valuable thing in AI. And so if I had some new money, that's where I'd put it. All right, Chris, great to check in with you today. Appreciate it. Thank you, Kelly. Chris Grisanti. And what a day it is, Dom. Dow's up 1 ,540 points right now. Yeah, 3 % gains, 2 % for the NASDAQ.

46:13Everything except the chips is higher, it feels like. Thanks for watching Power Lunch. Closing bell with Scott Wofford starts right now. This episode is brought to you by Schwab Market Update. an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast, or find Schwab Market Update wherever you get your podcasts.