Tech Sell-Off, AI Repricing and Washington Shakeup

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1:04Welcome to Power Lunch on this Friday to close out a crazy drive this week. I'm Kelly Evans alongside Dom Chu. Let's begin with some breaking news from Washington. Get straight down to D.C. with Megan Casella. Megan, what's happening? Kelly, we're getting our first big staff shake up at the White House since these midterm elections. President Donald Trump posting on Truth Social just a few minutes ago that Stephen Miller will become his chief of staff starting on Monday, and that Susie Wiles, the current chief of staff, will be departing. He writes, I'm pleased to announce that Mr. Stephen Miller, the current deputy chief of staff of the Trump administration and one of my most trusted advisors, will become the chief of staff starting on Monday.

1:40He says Susie Wiles, who has done an outstanding job, will be moving over to the Trump political operation. Now, Kelly, Stephen Miller, I think is a familiar name to most of our viewers. He's been associated with the president since starting early on in the first Trump term. He's really known as an immigration hardliner in the first term. He was behind what was known as the Muslim ban then. He worked a lot on Doge in this term as well. Susie Wiles, meanwhile, was really tasked with sort of and credited with bringing some discipline to the Trump operation. So a big shakeup here on the policy front in particular, Miller is known as somebody who has known how to use the existing law, existing laws, U.S.

2:19code to really go after some of the president's most ambitious goals, figuring out how to do it within the confines of the law. We'll likely see him bring some of that now to this chief of staff role. Guys, that's a big move. Who knows? Are there more to come, Megan? Or I mean, I don't know. How do we know? We'll have to see. I mean, a lot of folks are talking about some cabinet officials this week. Pete Hegseth is really in the spotlight that we have heard the president say a couple of times already this week. He thinks Hegseth's been doing a great job. Congress might have something to say about that on the impeachment front.

2:48We'll see when they get back next week. Marco Rubio, the Secretary of State, being talked about as well as to whether he's eyeing the exits. The president's first instinct, what we heard earlier this week, was that he doesn't anticipate any more shakeup in the cabinet. But of course, we didn't know about this one, so we'll see what else there is to come. Yeah, I don't know if we say rumors, speculated about. Megan, thanks for bringing us that news. We appreciate it, Megan Casella. Let's turn our attention now to the markets as we wrap up a volatile week. Even with today's slight gains, the Nasdaq and S &P will be down about 3 % and 2 % respectively.

3:18It's a bad week. It's not the end of the world. It's not among the worst for either index in this four-year bull market. And history may offer some encouragement. Bespoke out with a stat saying that in the three months after a 4 % drop like we saw yesterday, the S &P gains an average of 6.7%. So is it about, it's by the dip or a falling knife. It's like a kitchen analogy in here for our first guest. Let's ask Morgan Stanley, Investment Management CIO of Portfolio Solutions, Jim Caron, and Neuberger's tech analyst, Dan Flax. Welcome to both of you. Jim, maybe some top-level thoughts to kick us off.

3:50Yeah, I think from the top level is that this is much more of a reset than a retreat. So if we look at the fundamental underpinnings of the economy, whether it's the jobs data, we got some of that today, we saw jobless claims, we saw the joltz data, the consumer seems to be doing okay. The retail components seem to be okay. So I would argue that the fundamental growth, we had third quarter growth, I mean, which was also very, very strong. I think all of this together really tells us that we've had a reset from a position of strength. Ultimately, what this means to me is that this is a correction.

4:22Clearly, it's a correction on the amount of spend in AI CapEx buildout that's going on. But it doesn't tell me that the trend is reversing. It doesn't tell me that this is the end. What it tells me is that the trajectory, that the slope now won't be like as steep. It'll be a little bit flatter, but we're still moving in the right direction. And the speed might be more durable for the future. So what we're looking to do is kind of go shopping on sale and looking to broaden out a little bit. All right. Well, you're going, so you're not, CoreWeave is not at the top of the list or you're looking beyond?

4:54So, yeah, I'm looking beyond that. The way that we're thinking about this is that the rebound is going to likely have a lot more dispersion going forward. winners versus losers. What we're looking for are, whether it's in the tech sector or other sectors of the markets, is people who have companies that have contracts in place where the money is secure for the next couple of years. It's going to be money good. And that is likely to not impede any cash flows going forward. So when I think about multiples and I think about earnings, a lot of the multiples have reset lower, so it makes things a little bit cheaper.

5:26And it makes me want to own those future cash flows. And I just have to identify who's going to be more secure in those future cash flows. And then I can start to think about creating a more dispersed portfolio, diversified portfolio of winners versus losers. This is being characterized by some folks out there as the pause that maybe refreshes Dan. And the reason why I bring it up is because if you look at many parts of the AI trade from the NVIDIAs and Core Weaves of the world down to the caterpillars and whatnot. The revaluation and in the downside for this has been happening arguably since May and June of this year.

6:02So we've been kind of prepared for this kind of trajectory of maybe slow down, maybe more regulation, that kind of thing. It's been handicapping in real time. So if you saw a trade, and I'm not calling it a washout because there may be more to come, but it seems as though that's the kind of price action that would entice people to want to go back to those tech trades that have been momentum giants over the course of the past two years that have now fallen by maybe 20, 30 % or more from those highs? Yes or no? Dom, I think the answer is yes, and we remain selective. And it's really driven by our view on those companies that can innovate, execute on their product cycles through what may be a trickier period in terms of delays on data center builds.

6:47But I think the longer-term trajectory really remains healthy. And I say that because if you think about really this explosion of workloads in areas like AI, and if you look at a company like NVIDIA as one example, they're executing on their product cycles. You have their Rubin platform ramping, and I see very healthy growth there over the next several quarters. Look at Google. They're reinventing search. They have a cloud business that's accelerating and driving very strong growth for the overall company. And maybe I'll round it out with Amazon Web Services also seeing extraordinary acceleration.

7:20The key is really this ability to innovate, to invest, to think through on a longer-term basis how to create value for customers and ultimately shareholders. You know, it's interesting because your conversation, Kelly, in the last hour with Jeff Kilburg about the winners and losers, neoclouds and the other parts of the ecosystem, harkens back to something that we saw in the price action right on Election Day, which is the hyperscalers outperforming and everybody else really getting sold off. The thinking from Laura Martin over at Needham is that the big mega cap companies will have a comparative advantage when it comes to survival in that kind of environment.

7:54So is that the way that we should be looking at it? Winners and losers, the biggest balance sheets, the stronger ones, will end up being the relative outperformers. I think the balance sheets remain critical and clearly the operating cash flow growth and the ability to fund these enormous multi-year, multi-hundred billion dollar investments in some cases, that will remain critical. But you need to see the innovation. There's really an extraordinary seismic shift in what's happening technologically with generative AI, really getting infused across the technology industry and the broader economy.

8:28And so that innovation piece, Dom, I think remains essential. The balance sheet, the cash flow, plus the innovation, in my view, is what's needed to drive growth. You're the third person to talk about Amazon and what they said in the quarter. 40 % growth rates in Amazon Web Services for a quasi-mature business. And you don't have to have a huge bet on AI. I mean, it's going to kind of grow either way. So I just wanted to call that out. But also, can we show on our screen quickly the forward PEs of SanDisk and Micron, which maybe with today's rebound are up a little bit. they're in the threes, as in single-digit threes.

9:01They can only go to zero, okay? So what does that tell you, that either this is the buying opportunity of a lifetime or the earnings are about to, you know, contract 75 %? I think the market's trying to work out where peak earnings and growth rates are. And so the low single-digit multiple tells you that it expects some of the earnings that we're seeing right now to moderate over the next several quarters. I think what's important, though, If I use Micron, if I use SanDisk as an example, these are companies that really are critical to enabling the innovation and the benefits from artificial intelligence to find their way into the workloads in enterprise amongst the AI labs, of course, the cloud providers.

9:41And so NVIDIA is another one where the where the PE multiple is is undemanding, I'll say. And so even were growth to slow for a company like NVIDIA, I think the market, number one, anticipates some of it today. But number two, you have this broader platform and a company that has a track record of investing and executing on product cycles through challenging periods. So you feel more confident going to an NVIDIA with a lot of things going on? I like NVIDIA at current levels because it's not just the silicon in the systems. It's their broader ecosystem. There are millions of developers that are building on top of the NVIDIA platform.

10:21And that, in my view, remains critical as I think about the next few years. Jim, one final point. We'll give you the last word here. Is the macro backdrop enough to be able to support the kinds of growth, even moderated, that we are expecting from these companies, given what we're seeing in the jobs report today and everything else? It seems as though the economy is there and in almost a sweet spot there, I say. Yeah, I'm saying absolutely. So look, I mean, I think the macro growth, the economic growth is there. The question is, and it's exactly as Dan is saying, do the valuations represent the future cash flows?

10:56If you think the future cash flows are going to be strong, which is basically a statement on will GDP be growing above potential, which we think it will be, then you're looking at a lot of cheap assets. Balance sheets matter, cash flows matter. The thing that we want to look for are the companies that are going to be the most durable because the cost of growth is going to be higher right now. There's going to be more input costs. It could be political. It could be policy. It could be regulatory. All these different things are going to matter. It's just a question of can we overcome that? And I think for the stronger balance sheet, higher cash flow generating companies, that's where you want to be.

11:30And you can find them in a very dispersed sectors of the economy. It's not just tech, right? It's tech, but it's tech plus. All right. Dan Flacks, Neuberger Berman. Jim Caron, Morgan Stanley, thank you guys very much. Great conversation, and have a nice weekend, guys. Thank you. All right. Well, the CME FedWatch tool is pricing in at almost, by the way, speaking of macro, 80 % chance of the Fed hiking interest rates at its upcoming December rate policy meeting. Let's bring in Steve Leisman, who just interviewed, of course, San Francisco Fed President Mary Daly, and talk about just what the expectations are given that macro backdrop.

12:03Steve. Yeah, thanks, Tom. San Francisco Fed President Mary Daly welcoming the strong jobs report today, but not seeing the job market as a source of inflationary pressure. But she remains concerned about the Fed not hitting its 2 % inflation target, said the central bank has work to do. We also have underlying inflation that just is more stubborn than I would like it to be, and we need to get that down. So my expectation is we're going to have to tighten policy further, exactly when and how much is still to be decided, because we just have to take all the variables that are coming in. He called the tech sell-off painful and said AI repricing so far has been orderly.

12:40Notes that real wages are falling. That is wages minus inflation. His current policy is, quote, slightly restrictive to neutral. Here are the odds. Dom said slightly below 80, one point below 80. It's 79 % for that first hike in December. But you can see we've more or less priced out the second hike that had been priced for March now at just 40%. And the third hike now down to 22%. So about 50 basis points of hiking is gone. So far, the tech sell-off has not been enough to dissuade Fed officials from telegraphing a December hike. But with AI such a big part of the growth and even part of the inflation story, a continued sell-off here could change that outlook, even for the December meeting, Kelly.

13:18All right. That was fun, Steve. Thank you. Appreciate it, Steve Leisman. We're just getting started here on Power Lunch. Stocks are bouncing, but the NASDAQ remains in correction, Tori. Is it time to buy? A tech investor shopping list is ahead. And by the way, it's kind of a bounce, like a flat football. Plus, Lumentum's lost its luster. It's down nearly 40 percent this week. CEO Michael Harlston on whether the$115 billion deal with Marvell is still on track. But after the break, with Democrats set to take control of Congress, can President Trump keep the Iran war going? And what does that all mean for the prices of oil and gasoline?

13:54Former U.S. Energy Envoy Amos Hochstein weighs in.

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14:41I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, Women Leading in the Age of AI, wherever you get your podcasts.

15:06The U.S. and Iran appear to be moving closer to a potential breakthrough in efforts to end the war. Iranian officials say they're studying proposals on the country's nuclear program presented by Qatar's chief mediator. President Trump also recently spoke with Qatar's leader about the efforts to de-escalate tensions in the region. All of this, of course, coming as crude oil heads for its biggest weekly decline since 2020, following the blue wave in the midterm election cycle. Joining us now is TWG global managing partner, Amos Hochstein. He previously worked as a senior advisor for the Biden administration, focusing on energy security matters.

15:44Amos, thank you very much, sir, for being with us. Let's start right there with the Middle East developments. We've seen the blue sweep. We've seen oil prices fall due to a number of reasons. But I wonder energy policy in the U.S. and around the world, is it going to shift because of these latest developments in Iran and here with the midterm election cycle? Tom, it's good to be with you. Look, first, I think we should not be distracted by the headlines about breakthroughs. I think the war plans or the plans to go back to kinetic action in Iran or go back to war are very much alive. And I would say they're probably the lead policy at the moment.

16:24And that can come within days, a week. I'm not saying that they will, but I think that there is a very good chance that we go back to conflict. I think that the decision had been made before the midterms to go back to war at the end of this week. And even before the midterms, they were postponed by a few days to a week. But now that the midterms have happened and the blue wave or tsunami, I think the assumption is that that changes that calculus. I'm just not sure that that's accurate. The other point here is the administration and namely Vice President J.D. Vance in a very public and I guess notable comment on social media saying that they lost the midterms because of the war.

17:06The war was the primary reason why. Does this then change the dynamic of how the administration would look at that kinetic action in Iran or hypothetical kinetic action? They've already done it. and maybe they should just keep following through with it because there's nothing else to lose at this point. The fact that they've already lost the Congress to the blue wave means that maybe they have that emboldened spirit. Is that an accurate assessment or is it the other way around? One, look, the vice president put out a, you know, a very strange tweet overall on after the elections, somewhat distancing himself from that, from the action, right?

17:45Like he was like an analyst to it. But I think the president here, what matters is what the president's going to do. And I think you're right, Dom. Appointing Stephen Miller and yesterday's comments by the Secretary of Defense do not show that they are looking to recalibrate. I think the president, if he made a decision before the midterms to go to war, I don't know that this is going to change it. And so I still think the market has to take into account, and I was in the Middle East this past week, that the chance for war is we're still at, I think, still above 50-50 that we go back to conflict.

18:20And what that will do to energy markets is clear, right? We're going to see a resurge in energy costs in both the oil as well as in products, gasoline, diesel, jet fuel, etc. So I think that the risk of war is still very much alive. Look, I thought the decision to go to war in February was a mistake. I think it would be a mistake to go back now. The region, by and large, believes that this is a bad idea. But the president feels that there is, he only has three options. One is go back to war. The other is accept a deal that he doesn't like. And the third is to keep the status quo going, which is pressure on Iran economically.

19:02And he's frustrated that that takes too long. So he's faced with a lot of bad options as a result of a bad decision to go to war. And so sometimes presidents make a decision to double down, even if it looks like that's the weaker position politically. It may be one that he feels, look, I don't have any other elections coming up, neither presidential nor midterms. Now's the time to do it. Amos, we've spent a lot of time talking about the foreign side of this thing. The elections were very much about what it does to us here in America. How does this democratic sweep across Congress maybe shift energy policy, if at all?

19:38will they slow down regulatory aspects, the permitting process? Could it be an effect on clean energy, nuclear, LNG projects, all of these things? The Democrats won in large part because they were there campaigning to bring down the costs of living in America. If you don't increase supply of those things, arguably the costs for fuel go up again. How do you balance that if you're the new Democratic Congress? Yeah, I think it's a good question. Look, I think a number of things are going to happen. Number one, the president, when he came in, this administration decided to restrict, severely restrict renewable energy, specifically, most draconianly is the offshore wind, but either an onshore wind and some solar projects.

20:20I think there's going to be a lot of pressure from Congress now to say, hey, if you want to work with us, that's got to be turned back on. So, one, bring back the permitting and the licensing for renewable energy and accelerate them. I think that when it comes to permitting Democrats, there's not a lot we can they can do. I think if they want to shape a permitting bill, a new permitting bill, now that you have a big majority in the House and a big majority in the Senate, all you have to do is work with a few Senate Republicans and you can get a pretty safe permitting reform. Democrats campaigned on affordability and bringing down the costs.

20:55And so one is going to be about bringing more options to the table by expanding to renewables. The second is going to be forcing some kind of conversation with hyperscalers on how do we approach the entire build out of the energy demand side so that they're paying not just, quote unquote, their fair share, but paying a lot more into it so that it doesn't come with a bill to consumers paying much higher electricity costs. And so I think that either is done through legislation or that can be done by fear, threat of legislation and working with the hyperscalers and other companies to change that dynamic.

21:37And I think you're seeing already now some of those companies that refuse to engage in this debate in the last many months now already coming out and saying, all right, maybe we do have to have a conversation about how we make sure that the AI boom is not cost negative to ordinary American consumers. All right. Amos Hochstein, a fascinating conversation. Thank you very much for sharing your thoughts. Amos Hochstein, TWG Global. Have a nice weekend, sir. We'll see you soon. Thank you. Good to see you. Very interesting. Coming up, could this week's Tech Rec derail Anthropics IPO? We're already hearing it could change the size of the offering or the value of the company.

22:16Roadshow could begin on Tuesday. We'll break down all the fallout next.

22:33Welcome back to Power Lunch. This week's Tech Rec has potentially shifted the odds on when Anthropic could actually go through and go public. According to Kalshi, there's a 71 % chance that the AI giant goes public before the end of the year. That's down 20 percentage points from just earlier this week alone. Our Kate Rooney joins us now. And Kate, what exactly are you hearing about the state of play for this blockbuster IPO? Will there be a delay? And could Anthropics IPO come at maybe a discount to the previous estimates? Well, Dom, on the discount part, yes, that is what we're hearing. Delay, potentially.

23:08I'll get to that in a second, but probably not likely at this point, depending on market conditions. But the sell-off overall, especially in tech, it's not been great news for Anthropics IPO that's set a couple weeks from now. It's on track. I have been talking to investors who say even a$1.5 trillion valuation, which is really what many had come to expect, is now a stretch, given just the re-rating of tech and this unraveling that we've seen of the AI trade. Investors I'm talking to are now floating a$1.25 trillion. Others are preparing themselves for a trillion dollars, which means it would be below SpaceX's June listing.

23:41The biggest thing investors are now looking at is just getting that price above the last private valuation, which was just under a trillion dollars. We're not hearing, Dom, about a delay quite yet, but some of these investors did also expect for context here in terms of the numbers. They wanted Anthropic to go out at a$2 trillion number. That was just a couple months ago, and that was sort of the number to beat. The big change, though, of course, is this market mood overall around AI. Anthropic will also be the first pure play AI lab. So it's going to be a major test of investor appetite for this entire asset class.

24:12The challenge is going to be now asking institutional investors who just got burned by the AI trade to then go in and buy into this deal. Many of these people that I talk to ask not to be named because they are close to the company. The thing to watch and that they're watching for now is the October numbers. I'm told Anthropic will need to update those numbers. They call it a flash update before they price the S1. So, or excuse me, price the deal. That may happen next week. We are expecting that roadshow to kick off potentially Tuesday. So folks I'm talking to say you might get that October update kind of coinciding with that, guys.

24:45Kate, is there anything you're hearing about if there is anything that could happen hypothetically that would delay the IPO? More market volatility, Dom. I mean, if markets were just if it were untenable and it was super volatile and we had, you know, seven days like we had yesterday, that would, from what I'm hearing, cause a CFO to rethink this or a price below the last private valuation. They call that a down round. That's not what anybody wants. They got enough cash to last until early next year. And that's when you really might hear them say, OK, let's take a breath here, maybe not less. But for now, that is not what we're hearing.

25:18We're hearing it's still on track and it's all systems go despite the volatility. All right. Kate Rooney with the latest on Anthropic. Thank you very much for that. We appreciate it. Thanks, Tom. And let's get to Pippa Stevens for the CNBC News update. Hi, Pippa. Hi, Kelly. Three foreign nationals are accused of using AI to impersonate CEOs and lawyers in a scheme that stole more than$129 million from companies worldwide. Prosecutors say the group used cloned voices and images to convince employees to wire money for fake transactions. The defendants were arrested in Spain and Britain and faced fraud, identity theft and money laundering charges.

25:53Extradition requests are pending. Ukrainian President Volodymyr Zelensky is pressing Western allies for written guarantees, spelling out how they would respond if Russia attacked again after a peace deal. His appeal follows two days of talks in Brussels and comes before U.S., Ukrainian and Russian officials meet next week in Abu Dhabi for their first trilateral talks since February. And two giant pandas made their public debut at Zoo Atlanta today, bringing pandas back after a two-year absence. The pandas arrived from China under a 10-year loan and are settling into the renovated panda grove. Atlanta is now one of three U.S.

26:30zoos housing giant pandas. Dom, I got to book my ticket to Atlanta now. They always make me feel warm and fuzzy, the pandas out there. Pippa Stevens, thank you very much for the news update there. We appreciate it. Coming up here, can Marvell and Lumentum's$115 billion mega deal survive the tech sell-off this week? Lumentum CEO Michael Hurlston joins us next. Keep it right here.

26:56Welcome back. Oracle shares are lower on news that Microsoft will wind down its partnership to rent AI cloud capacity from the company. Let's get to Seema Modi with all the details. Seema. Hi, Don. We've been speaking to a number of sources. And what we've learned is that Microsoft is looking to consolidate its neocloud partnerships. Of course, these partners provide and lease their chips to customers like Microsoft. What we've been told is that Microsoft is currently holding discussions with executives internally to formulate a plan on ways to thin out the number of NeoCloud partners it works with.

27:30Separately, we did learn that Microsoft is ending one of its cloud contracts with Oracle that involves older dated NVIDIA chips, the A100 specifically. An Oracle spokesperson not disputing this sort of update, but adding that it is able to sell older chips as old as four years old at a premium right now in the market. But guys, taking a step back, this move does signal just one way the broader market scrutiny we've been seeing across the AI ecosystem is sort of affecting and changing the types of partnerships we're seeing across the AI buildout. Separately, we did speak to the CEO of Iron, Daniel Roberts, the third largest neocloud.

28:07He told me last night post earnings that there is what he calls a disconnect between what he's seeing in the public markets and what's actually happening at the customer level where he sees demand remaining strong. Our attention now turns to CoreWeave and Nebius, which are set to report next week, guys, where, again, the conversation will really be around the future financing needs of those two companies, but, again, the relationships they have with these partners like Microsoft. Yeah, exactly. Seema, thank you. We appreciate that. Seema Modi reporting. Meanwhile, Lumentum is caught in a sharp repricing of the AI build-out.

28:41The shares are down nearly 40 percent this week. tough and one of the worst performers of the S &P as election-driven concerns about data center construction collide with Marvell's all-stock acquisition officer. CEO Michael Hurlston joins us to address the sell-off, the deal, and the outlook for the business. Michael, we have checked in with you at various points throughout a very tumultuous year. First of all, I haven't spoken with you since the deal was first announced, so there's that just shock factor to still absorb. This is one of Marvell's biggest acquisitions ever. You guys were clearly sitting in the catbird seat.

29:13Then all this gets announced. The share reaction on that day is a little wobbly. And now this quasi implosion of the AI trade. I'd love to know your thoughts about it. Look, Kelly, it's great to speak to you as always. I always enjoy our interactions. And this is a tougher one. So we've in the middle of announcing this deal with Marvell, which we're still super happy about. I think the long-term outlook for the combined companies is excellent. The timing was bad. So we're in the worst sell-off we've seen in recent memory around the AI trade, as you've been reporting all over and over again. The one thing I would say, and you had a comment up from the CEO of Iron, I would second that.

29:57There's a massive disconnect between what we're seeing in our demand book and what the markets are showing. Our demand couldn't be stronger. And yet we are seeing this massive, massive sellout. Right. And the deal is an all stock deal, which makes makes this extra tricky. If it were a cash deal or something like this, somehow debt financed, you wouldn't necessarily be in this downward spiral. But four and a half shares is what the deal involves as what your shareholders will receive in turn for every one Lumentum share. And Marvell, so as it's been sliding. So, you know, and you're still trading at some of a discount.

30:33This could be a complex deal to close because of regulatory holdups in China and elsewhere. It could take 12 to 18 months. But are you still confident that Marvell is the right buyer for the company? I hate to ask it quite this way, but does the reaction in the markets give you pause at all about that? Look, we're obviously not happy about the reaction. But I'd say a couple of things in reaction to your question. First, we really like Marvell. We think they've got a lot of upside from where they are. And that's part of the reason we took all stock. If we had have said we weren't confident in their numbers and their outlook, and obviously, as part of the diligence process, we got to look at their books and understood their design wins.

31:15It's impressive. I think they're on an excellent trajectory. And our board of directors never considered anything but taking all stock. We recognize there's going to be challenges in regulatory. To the second part of your question, it's going to be a bumpy one. But we're also optimistic we get through. We've had a track record between myself. I sold a company previously, and in a very tough regulatory environment, we got that one through. And Matt Murphy, the CEO of Marvell, has had a great track record getting things done well ahead of predicted timelines. So we think we're going to get it through.

31:52it's going to be the biggest challenge, I think, from here to there. Yeah. And there are big breakup fees on either side. I think theirs is almost$6 billion if they walk away. Yours is almost$3 billion if you do. So that sort of thing. So it's almost like you're incentivizing each other, like tying each other to the mast here to get this across the finish line. And you mentioned that you got to look at their books. You have a sense for their upside. That's why you wanted the structure of this deal, four and a half shares, not a cash, not a sort of like a steadier financing deal. Does the election results Tuesday, you think, and I understand what you're saying, that you're seeing strong business right now.

32:28Does it risk, put at risk the build out? You know, in your company, you guys make, it's like if you thought copper fiber was impressive, you know, lumentum, light, you're the next level. Optical is kind of the next level on top of that. This is all the technology that is wanted for these data centers that are being constructed. Is there any sense or risk that there might be a slowdown, that even the second derivative might be slowing down? Yeah, a couple of things. First, our business is largely predicated on that shift that you mentioned from electrical to optical. And that's really the growth driver that sustains us and, to a large extent, Marvell through 27, 28, and 29.

33:12We've been very dependent and tied to the data center build out up until this point. As we look forward, we are less dependent on that than perhaps other companies. Yes, we definitely want data center builds to continue, but our main growth driver is more about that shift from electrical to optical, and that can take place in existing data centers. So while we understand all the noise and that, and by the way, we don't see any issues. We might not see issues, but certainly given our place in the market, we think that there'd be a slowdown on our backlog. We're not seeing that. But again, our biggest driver is the shift from electrical to optical, and that seems to be going full steam ahead.

33:59And Michael, it's Dom. I wonder, in an environment like this, you've already done countless scenario analyses about this deal and what it could mean. You have to do now countless more scenario analyses based upon kind of the outcome of the elections, anticipated timelines, hypothetical regulatory constraints. What is the conversation between you and, say, a Marvell together? Hypothetically, you guys are coming together. What's the conversation like between you and data center developers and operators about just what kind of timeline you are now dealing with? We know the money is going to be spent, but there were assumptions about how quickly it would be spent.

34:37And now those assumptions are going out further in time. What's that conversation like? Yeah, Dom, look, I think, as I said a second ago, the data center build out is less a driver for our business and for Marvell's. We're much more predicated on the technology shift within it. That being said, of course, we're sitting here running scenarios, as I'm sure Marvell is, trying to look at how we recover some of the lost shareholder value. That's super important to us. Both companies have done an incredible job over the last couple of years building shareholder value. And our goal is to get that back as quickly as we can.

35:16And I think our numbers were super strong. One of the things that got lost in this whole deal was the numbers that we reported. we showed nearly 20 % sequential growth on quarter, incredible margin expansion, both gross margin and operating margin. And our expectation is that Marvell is going to have some good numbers to report in about a month. And hopefully that doesn't get lost in the backwash of the deal and the downturn we've seen in the markets in the last week. Well, Michael, we really appreciate you joining us at a time like this, especially so. The comments have all the more significance than if you were to join us, you know, when the dust settles, so to speak.

35:56So thank you for making the time. Kelly, thanks for having me on. Always great to see you at CEO. Michael Hurlston, CEO of Lumentum. All right. Well, still ahead on the show, the Nasdaq 100 is on pace for its worst week since April of last year. What's worth buying in the sell-off? What's worth not buying? A Tech Investor's Top Picks is coming up next.

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37:09Follow and listen to CNBC Changemakers, women leading in the age of AI, wherever you get your podcasts.

37:21It's been a pretty crazy week for your money. Tech is rebounding today, but the Nasdaq is trying to recover from its worst route in a year and a half. Chips are up today, but the semi-index is down 12 % or so since Monday. Our next guest thinks tech is oversold, and he is buying most of the MAG-7, with one exception. Jason Ware is the CIO of Albion Financial. Do we still talk about the MAG-7? You know, now I hear about the big three, Jason. It's like Anthropics, SpaceX, OpenAI. I don't know. We're not quite there yet in terms of publicly traded stocks. But what do you like, and where do you see entry points right now?

37:55Yeah, we're keeping it simple. Thanks for having me, Kelly. We continue to like the mega cap growth trade. I would remove Tesla from that. Tesla is too expensive. And the reason we remove Tesla beyond valuation is we're looking for quality. At the end of the day, the AI trade up to this point for the last couple of years has really kind of captured anyone who is very AI centric, who is an AI enabler, including lower quality stuff like neoclouds. I think that trade is done. And I think going forward, what we're going to see are the companies that have the best balance sheets, management teams, market positions, profits, and diversified revenue streams, and oh, by the way, have lower valuations, reassume leadership.

38:35So that's where I think your viewers should focus. In perhaps more controversial territory, we were talking earlier about some of the chip and memory stocks that are trading at a three-time, you know, a forward multiple of three. To Dom's point, down from a forward multiple of seven or six a couple of weeks ago, are they cheap enough now for you that you would be a buyer here, Or is this precisely why you wouldn't want to own them? Yeah, it's a great question and a good observation. So we own diversified semis outside of our direct exposure in NVIDIA and Broadcom via the SOX ETF. And we do that because we want to spread out the outside of the mega cap chip exposure in a diversified way, going specifically to Micron and some of these other areas that look cheap.

39:20I think those are valuation mirages, quite frankly. These are highly cyclical businesses. Everyone says this time is different and that the cyclicality has gone away. We don't view it that way. I think they're trading very cheaply for a reason because we will hit a point here in the next couple of years where pricing and inventory is going to hit and it's going to cause those PEs to not actually be as cheap as they seem today. So we're avoiding those areas. We stick with quality and durability within tech. Any final comment amidst the sell-off areas where you have been buying that maybe you got entry points?

39:53So you think the market's getting it wrong? Yeah, so I think there are some bottleneck areas within tech that have been oversold. But again, the theme here is quality and making sure you have that valuation margin of safety. We like Qantas services and helping supply the power and build out the grid. We like Amphenol as far as interconnects and helping provide critical fiber and copper to data centers. We think Cisco, not the food company, but old Cisco is doing an incredible refresh in terms of providing the components necessary to build data centers. They're all oversold in here. although they are certainly performing much better than the junkier parts of the market.

40:26So again, quality, valuation, and have patience. And if you have capital, I think now's a good time to buy. Or showing a few of your favorites in the other space, consumer as well, Starbucks, you know, and so forth. Jason, really appreciate it. Thanks. Sure. Thank you. All right. With the NASDAQ in correction territory still, we're taking a close look at how much tech is baked into your 401k and IRAs and the risks that come with it. That story is coming up next.

40:59Welcome back. Wall Street has suffered its worst session since April of 2025, and retail traders and investors sold stocks at a pace not seen, believe it or not, since the COVID pandemic. That's according to data from Vanda Research. Yet in CNBC's Flash poll, financial advisors say sell-offs are mostly a buying opportunity. Our Sharon Epperson joins us now with how to navigate these moments and keep longer-term plans in focus. Sharon, a lot of people maybe shouldn't be day trading 401ks anyway, but you can't help but look in this kind of volatility. Well, you can't help but look, but what you should be looking at is what you're invested in.

41:37When we took this poll, again, a flash poll yesterday afternoon, reached out to 121 firms, 38 of them responded, and three-quarters of those who responded, these financial advisors, said they're not making changes to their portfolios for their clients. what they're doing is checking, telling investors to check their asset allocation or to stay the course. That's the main thing that they're saying to do. What exactly, though, can you do in a 401k plan? Because like my 401k plan, our one here, there are only so many options and they're kind of like stock options or there are bond options and then there are target date funds.

42:13There's not a whole heck of a lot I can do to really change things up. Well, if you look at what some of the members of the CNBC FA100, said, and those from the Financial Advisor Council that are part of CNBC that we reached out to. They said that with a 401k, it's actually you're in a better position here because as the market is going down, your dollar cost averaging into it. So Andy Pratt at Bernie said, listen, this is a time that you're actually in a better position now to get into the market because prices are lower. So this is an opportunity to do that. Carolyn McClanahan, always the thoughtful person there, physician and a financial advisor who's on the FA Advisor Council, says it's important to not worry and not panic, but to rebalance.

42:55That if you have an investment plan, now's the time to go to it and stick to that. And then another financial advisor that we talked to said, hey, listen, this is the time to, you don't want to be nimble. You want to show that you're resilient. The market is going to go up and down. That's why you're a long-term investor. You're going to stick it out. Resilience makes more sense than trying to be nimble in this environment. How important is it to have the conversation about just what your risk tolerance is, given your stage in life and what exactly your time horizon is for when you need the money?

43:23I think it's extremely important. And those are conversations that if you're not having them with an advisor, you should be having them with your partner. You should be having them with your colleagues, with someone, and certainly with yourself about what you're really investing for. And knowing that if it is money that you need right away in the next five years or so, it probably should not be invested in the market. All right. Sharon Epperson with the latest on your 401k and making sure it's a 501k and not necessarily a 301k. Now, for more insights on Sharon's articles, please go over to what happens with the financial advisors and see what they're recommending.

43:56Go to CNBC.com or scan that QR code on your screen right there for the Your Money Money 101 newsletter with Sharon Epperson. Just go over there and scan that QR code, Kelly. And let's get a quick check on crypto. Bitcoin is under pressure after the stronger than expected jobs data. Feeling some expectations for higher rates, but Bitcoin's also on track for a fifth straight weekly loss. Longest losing streak since February. More Power Lunch after the short break.

44:30Quick programming note before we go. Brian Sullivan will be live at the Edison Electric Institute conference on Monday with some of the biggest names in the utilities space. It's now one of the most important sectors in the market. We'll be hearing exclusively from the CEOs of Exelon, Entergy, PG &E, and Excel. That's Monday here on CNBC. Quick check on SpaceX shares as well, which are up 9 % and back towards and at session highs. Elon Musk speaking at the Ron Barron Conference in New York City this hour. Big headline so far is that they see annualized revenue above$500 billion by December of 2027.

45:03All right, let's stick with that kind of Elon Musk theme. Say goodbye to the Cybertruck while you can. Tesla's winding down Cybertruck production at the Texas Gigafactory mid-2027, making room for its CyberCab and RoboTaxi ambitions, Elon Musk say on X this morning. Cybertruck deliveries began in late 2023. The model faced weaker sales and several recalls, but has gained some traction recently, but not enough to keep the production going there in favor of RoboTaxi's. Tesla shares you can see up 5 % so far, Kelly, today. You know who else had a good week? Who's that? Burger King. RBI. You want some green in this market?

45:40Their advent calendar is helping to drive sales. The most whopperful time of the year? Is that what it is? Yeah. Best week since 2022. It's not all AI related, everybody. Thanks for watching Power Lunch. All right. Have a great weekend, everybody. Closing Bell starts right now. Within every beautifully busy day, there's a brief moment between now and next. A moment made just for you to recharge, refuel, and most importantly, bring out the Bob. Bring out the new Bob Evans protein mac and cheese. Bring out the rich, velvety goodness, now with 18 grams of protein-packed perfection. Bring out the mmm.

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