Previewing Big Tech Earnings, Anthropic IPO Announcement, Countdown to Midterms 10/26/26

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1:03It is the big week. It is the start of a big week for your money. Welcome to Power Lunch, everybody. I am Brian alongside Kelly. This is the busiest stretch of earnings. Seizing up Microsoft, Alphabet, Amazon, all reporting this week. Investors looking for nearly 70 % growth out of tech. The bar, my friends, is high. After massive spending on AI, The question is whether cloud growth and new AI demand translate into returns. Ed Yardini, president of Yardini Research, here to break down what results might mean to the markets and your money. Plus, the first look at AI giant Anthropic officially formally filing to go public.

1:41New details reveal soaring revenue, steep losses and some mounting risks. The IPO crucial test for the AI sector. Could it become a defining test of investor appetite for AI? We will explore that. In fact, that's where we start today, including the markets and your money. Stocks are higher with Anthropics IPO reviving the AI trade. You've got the chips memory. Even the neoclouds are now in the green. They shrugged off that warning from Elon Musk that more than 200 companies in the space could face, quote, guppy level death. But take a look at this chart from Bespoke. The red dots mark the days when the S &P 500 fell at least one percent, even as more stocks rose than declined.

2:20Seven of the 13 such days since 1990 came in 99 and 2000. In other words, is this a pattern that's showing up again at the sign of a top, a warning sign that the bubble could be close to bursting? Let's ask our guests. Ed Yardeni is president at Yardeni Research, and Ari Wald is Oppenheimer's head of technical analysis. It's kind of a chart question, Ari, so I'll start off with you. What do you make of it? Well, the bubble bursting, no. We've argued why should we expect a bubble-like collapse without bubble-like returns? but making the case of secular bulls still intact. But I think within that, they call on these intervening cycles for a reason there.

2:57And we are kind of worried about some breakdowns that we're seeing in terms of internal breadth. I think the key positive is that risk is oversold. I think we're still set up for that year-end rally. What does that rally look like? Is it going to be undermined by lower highs and the small cap indexes and leadership and credit? And could set up for a reset year in 2027, but again, within the context of a long percent. How long has it been since we had a 10 % pullback? It's a long time. Anything this year? In the second quarter there. Did we have one this year back in? I would think March, April we got it.

3:29Yeah, March, April. Okay, so we've had one. Yeah. Should we, is that, I mean, I'm just trying to put into context because I like your opening line. If we're going to, wait, say it again. We should have bubble-like returns. How do you say it? We have to have bubble-like gains. Yeah, the steadiness of the long-term advance is underappreciated by Wall Street. We haven't, the comparisons of the late 1990s, we don't see it in our work. Ed, jump in here. Well, everybody is expecting a bubble or has been saying it's a bubble. So it's from a contrarian perspective, which I like every now and then. I don't worry about it.

4:00I think air is coming out of the bubble without the bubble bursting, which is the best solution to all these concerns. I think the fact that the credit markets, particularly the bond market, is starting to actually be very discriminating in terms of which bond should have what rating. I think they're moving even faster than the rating agencies, and that's a good thing. If the bond market's going to regulate the availability of capital to the AI trade, I think we're in good shape. So we should go back to the top where we referenced Elon Musk's tweet over the weekend about guppy-like returns. For 90 % of the audience that didn't see that, it's probably very confusing.

4:36What he did was he put out a tweet effectively showing some of the names of companies that I assume, because again, I don't want to speak for Elon Musk, that he assumed or was suggesting were some kind of bubble-like fish that were soon to be deceased or at least wounded. I'm not exactly sure how to read it. How do you read it and what do you make of his comments? Well, look, I think every technological revolution, every industrial revolution always has lots of capital pouring in willy-nilly. just very excited about the concept. And then you have way too much competition. And then some of the companies start to fold and borrowers start to find that their lenders are becoming much more cautious about lending to them.

5:24So again, I think there will be some failures here, but this is an ecosystem, sort of a band of brothers and sisters where they're all going to bail each other out. You know, Anthropics is going to go public. They'll have a lot of cash. And if they need to help out a neocloud, they'll do it. Yeah, let's talk about return on AI investment because, Ari, despite all the massive spending and hype, Apollo Investments tors in Slock out with a new report suggesting that companies are not yet seeing any clear payoff from all the AI spending and may look for cheaper ways to access AI. It is an interesting thought piece, but I wonder if it could also impact spending if he's right about how companies are thinking.

6:03So what would could that do, I guess, Ari, to the macro markets if some of those companies do either, to Ed's point, deflate or pop or whatever word you want to use? We're not a tech company, but we have a tech guy that does everything for us. And he uses Claude all the time. And he said he's doing stuff at the speed of light compared to what it used to be like. So I think everybody's got that kind of advantage, and I don't think that the Apollo view is correct. And the only thing I want to also highlight about that, we talk about it. I feel like almost Anthropic and Claude are two different brands, but they're not.

6:46Like Anthropic, when you think Anthropic, you think Dario Amadei, politics, doomerism. When you think Claude, you think, wow, incredible. Use it every day. They're the same thing. I mean, so I don't know, Eric. Well, how about the question? Sorry, we posed to you. I like to think in terms of industries. And so when I AI, I think semiconductors have been very correlated to that this year there. And I think what we see going on and I think of the defining characteristic of technology really over the last decade has been this intersector rotation. Semiconductors have had an exceptional 18 month run.

7:18And a lot of them now just given the beta that they've they've worked up into those stocks there. They're seeing some compression there and some correction. But at the same time, you're seeing software pick up the slack and getting some nice breakouts there. So I think that's very telling, bullish rotation that's going on in that group. Is there a way to play the AI just to buy the NASDAQ 100 and just forget about the details in between? That's probably one of the best big benchmarks over the last year. I think you can't go, I mean, as far as a proxy for large growth. Ed, you know what's funny about that?

7:50I was thinking in the car on the way over about that very thing today. Yeah. I was thinking about my kids and what they, and by the way, this is something Jim Cramer has been saying. NASDAQ 100 and your kids rolled into the same commentary. Yes. If you read Jim's book, How to Make Money in Any Market, I think is what the most recent one is called. He talks about how the NASDAQ 100 should be the diversified sort of equity holding for younger, emphasis on younger investors. You agree? I completely agree. I mean, it's had an amazing run for decades. And it constantly refreshes itself. You constantly get new ideas in there.

8:24And I figure the winners are going to continue to make that a winning index and the losers will go out of business, they'll be acquired. I think, Ari, if I had to put it differently, the reason why this is on my mind so much is because the economy is being technologified. Can someone give me the right word? I mean, we're talking about these AI tools transforming whatever is left of any non-tech business in this country. That's what it's going to do. So all these things about how big technology is as a portion of the S &P or how, I mean, to me, it's like it's taking over and remaking everything.

8:58And so when I think about the upside, that's why I think about the NASDAQ 100. And if you look at a five-year rate of change on the NASDAQ 100, and that's the index I'm using also when I say it's an apples and oranges as compared to the late 1990s. That five-year rate of change was up 1 ,000 percent in the 90s. Now you're kind of hovering around this 200 percent and that the real bifurcation has been that everything else hasn't been working. So really for us, the catch up trade is is excuse me, the convergence trade is catch up, not catch down. I think that could be a driver for multiple more years of the secular advance.

9:31And I think it's the steadiness of the Nasdaq 100 that is so attractive to us. Well, if that weren't exciting enough, are bonds a historic buying opportunity? Let me just quickly shift gears to that, because Rick Reeder did say that he thinks this is a historic opportunity. The 10-year yield is around 5 % for about six weeks, plus or minus, a little bit under that right now, Ed. Is it the moment, a moment, to kind of get this in the portfolio? Well, I think the 10-year bond yield is back to normal. People keep saying that interest rates are going to stay higher for longer. I said, no, they're not.

10:03They're back to normal. They're going to stay normal for longer, which is where they should be. The whole aberration was what happened between the great financial crisis and the great virus crisis. So if I had to pick where the long bond is going to be a year from now, I'd say 5%. Asking me by the end of the decade, 5%. I think as long as we don't have the central banks meddling the way they did before with quantitative easing, I think the bond yield is now reflecting the strength of the economy and productivity. Just to underscore that for investors, though, if you want to put 5 % in your pocket, that's fine.

10:36If you want to put more than that in your pocket, you're not saying you're going to get that from bonds. That's where you have to go back to the NASDAQ 100, I guess. Exactly. Exactly. I think you're going to earn the coupon. I don't think you're I'm not expecting to see rates going down. And we have a rate meeting on we have a Fed meeting on Wednesday. We're going to be in D.C. apparently. What's your expectation, Ari? As a chartist, do you care what the Fed does? It was rates up, risk on. It's actually was the little near term top in rates. That is, you know, A.I. debt concerns everybody flocking to safe haven treasuries there.

11:06And, you know, to us, it's obviously five percent was a big level. Often prior resistance becomes support. Obviously, you'd like to see some leveling off and range-bound action, but I think the equity market overhaul can withstand that. I like that. Rising rates are the risk on trade. That's hard for my mind, you know, after everything we've been through. Guys, thank you. Really appreciate it today. Ari Wald and Ed Yardeni. All right, we've got a long way to go. We are just getting started and coming up on this busy Monday, what Dan Ives is most closely watching from Tech Earnings this week. And it's not just earnings that you need to focus on from next week's elections as well.

11:42But ahead of that, what is happening in the Middle East that may give us some real hope of peace? Maybe the news you aren't hearing, but you will next.

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13:31Welcome back. The week is largely going to be defined by the big tech names reporting, but don't sleep on the energy names as well. Baker Hughes reports Wednesday, Chenier on Thursday. On Friday, the oil majors Exxon, which is at an all-time high today, by the way, and Chevron, which might be as well. So what type of volatility should we expect? Oliver Rennick has been following the action. Hi, Oliver. What do you see? Hey, Kelly, probably short answer is a lot of volatility. Stakes are moving up in the energy complex after volatility in oil rose more than any other asset class week over week, according to SIBO.

14:06The OVX rose nine points to the 70th percentile of the past year, as implied vol in the USO ETF hit the highest in over a month. Oil vol going up while prices are going up mirrors what we saw in earlier stages of the Iran conflict in March and August. In short, it means traders are bracing for even bigger swings in WTI, which is a bit disconcerting when it's happening while we're already at$100. However, perhaps some comfort is that there's about an even number of puts and calls trading in USO, and the balance of open positions hasn't tipped strongly one way or the other. Energy stocks seem like perhaps the clearer way to hedge.

14:45Traders right now are very bullish XLE, buying calls and selling puts in today's session, And volume in Baker Hughes, to point one out, is more than four times the average, thanks to someone buying a string of 65 strike calls, guys. They expire mid-December and need a 17 % rally in Baker Hughes to work. Yeah, big earnings all this week. Very quickly, Oliver, there was some big action in the oil options, not oil options earnings for stocks, but the oil options market itself. Some big action on Friday. What happened? Yeah, Brian, the fact that we've seen volatility move up here, I think it's really people making bets on moves in either direction.

15:24The reason why I say that is because the balance, the ratio of open interest looks quite even between puts and calls. So there's folks that are looking at the history here saying they want to fade the pop. But I think at this point, if things get worse, it could really be exacerbated into a potential blowout type of move that we're not ready for. So regardless, it seems like folks are ready to hedge in both ways. No bias on which way it goes right now from the flows, but it basically tells us to be on our toes. Oliver Rennick, always on his toes. Oliver, we appreciate it. Thank you very much. All right.

15:56In the meantime, oil prices on paper down just a little bit following a high stakes meeting took place in Iran today. You may not have heard much about it, but officials from Saudi Arabia, Turkey and Pakistan met with Iranian officials in Tehran, All part of another effort to get some kind of peace deal, Iran with Iran, and maybe Yemen's Houthi forces done. Now, speaking of the Houthis, that meeting comes as the Yemeni rebel group claiming they attacked again Saudi Arabia's east-west pipeline and Riyadh's airport. They have hit the airport a number of times. The last two weeks, they've killed innocent civilians, some of whom, by the way, were religious pilgrims.

16:35This is just one thing happening in the crazy busy world of global energy. And one man who tracks all of it and trades on much of it is Jonathan Wagner. He is co-head of the desk at TP Moab, an energy and commodities brokerage. John, good to have you on the program. I know you're a big options guy. You just heard what Oliver Rennick had to say. Does that sort of options positioning line up with what you are seeing in the market right now? Yes, it absolutely does. And we've seen it from both sides, where for the past few months, you've had some pretty large individuals or funds, whatever you want to call it, who basically are convinced that there will be a deal, convinced that oil needs to go back to$60, convinced that this war premium should dissipate and disappear, and has been buying massive amounts of put spreads in front-end rent.

17:27that also has caused vol to rally pretty decently and it's called it has caused call skew to be cheaper than what it probably should be as a result now recently as we've seen the escalation we've seen a huge amount of call buying come in given the cheap skew on the back of you know on the back of uh the rhetoric that we're going back to war so you know the systematic guys are still running very long, and the actual funds are very, very torn here, especially as we head towards year end. I mean, the telegraph... How do we, John, I'm sorry to jump in. How do we, listen, every hour we get some kind of a new headline, ship attacked, peace deal hopes, missile launched at Riyadh.

18:10It goes back and forth and back and forth. How wild right now, in terms of the headlines, the information flow, and the money flow, is the oil market. It is about as wild as it can possibly get. And it has gotten so wild that people have actually said, I can't play this market and I'm out. And the lack of liquidity in the market right now makes it way worse. You know, it's not like guys are certain or they're betting on sure things. We are basically throwing darts. We don't know what Trump's going to do. We don't know what the Houthis are going to do. We don't know what Israel is going to do. And, you know, I think that that really just makes trying to trade these headlines in these markets much harder than it is.

18:58People are definitely afraid of, you know, a tweet from Trump sending oil down fifteen dollars. And they just said, look, I can't you know, I can't be involved in something where, you know, I'm just going to lose everything so quickly. The flip side of that is you're betting on guys. You have guys betting very large positions to the downside that that will, in fact, happen. There will be a taco. So just in general, you're getting very large flows in both directions. So we are seeing then, if I'm hearing you right, John, we're seeing a lot of big bets against oil, meaning people betting for lower oil prices.

19:36I assume that means they think and maybe have for eight months now that some kind of deal is imminent. A lot of people are still betting oil is going down. Correct. I mean, not only are they betting that there's going to be a deal, but, you know, there's been a lot of headlines, whether they're true or not. And we're not here to debate that, that, you know, Middle East crude exports are back to pre-war levels. I don't believe that. The data doesn't to me doesn't show that. But, you know, people believe it. People think that this will end. People think that oil is freely flowing. And sure. Yeah, they've made some incredibly bearish bets.

20:17The DeSprint options go off the board tomorrow. You know, there's over 100 ,000 lots of OI on a dollar wide digital at 100 bucks. I mean, we're trading 115 right now, so it doesn't look likely. But, you know, you're seeing that you're seeing those kind of plays for the next few months where guys are betting very large size that the market will come down very quickly. Wow. Really great intel there. Rare intel that we don't hear a lot about. John Wagner of TP Moab. John, really appreciate it. And talk to you soon. Thank you. My pleasure. Thank you for having me. All right. You're very welcome. All right.

20:49Speaking of energy market clash, now a major energy deal, Pittsburgh-based EQT buying range resources, an all-stock deal valued at$13 billion or$50 billion if you include debt. The huge natural gas deal brings together two of the biggest producers in Pennsylvania and easily creates the largest natural gas producer in the entire United States. The deal expected to close early next year. Programming note, we'll talk more about the deal, why they did it, natural gas, and more with EQT CEO Toby Rice on Thursday. Kelly, because the next couple of days are going to be occupied by ye olde Federal Reserve.

21:24Ocupado. Before we go, here's a live look at the Russian diesel shipment headed for the U.S. It's now sailing between Norway and Denmark. Bri, where is it there? Top right of the screen? Between Norway and Denmark. Slow. Well, you know, some of us are math challenged. It's on its way into the North Sea, and it's carrying about 300 ,000 barrels of diesel. That's about one day's worth of U.S. use in this Russian ship right now that's headed for the U.S. President Trump is under pressure to bring diesel prices down. This is the first Russian diesel shipment that would reach the U.S. since 2023. Well, I will say this.

21:58If that graphic is right, the ship hasn't moved in three days. Interesting. Because I look at a couple things every day. I look at CNBC.com, right? I look at my blood pressure, and then I look at that map. That ship was there three days ago. It's a good thing you look at your blood pressure before the map and not after. Well, it depends on how things are going with either one. Some days it could be a help, right? But not right now, it seems. It's an interesting point that it possibly hasn't made any progress. Maybe there's more to the story. We'll see. Coming up, we have our first in-depth look at Anthropics Financials as it files for an IPO.

22:30We'll do a deep dive with Leslie Picker next.

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24:17It's official. Anthropic is coming to the public markets. The AI giant made its IPO paperwork public earlier today, and the prospectus is packed with numbers worth a closer look. And for that, we turn to Leslie Picker, who has gone through the filing. Leslie, all however many. 340 pages. But I did not see page numbers on my Virgin. Oh, yeah? Is that just me? Maybe it's just me. I see page numbers, but yeah, all of a sudden, it starts to look like a blur after several hundred pages in. But there's a lot of really interesting stuff in here. And I thought one number that we could kind of discuss as we think about just the impact of AI on labor and what it means is what we're seeing in terms of talent density at this company in particular.

25:00They say they have 5 ,300 employees and the trailing 12-month revenue per employee, trailing 12-month revenue per employee, see that? $6.6 million per employee. That is up from about a million dollars just a year ago. So you see a huge surge. I know you're doing some math right now. Okay, separately. Apparently, I got the map wrong with the ship but it's near Denmark. I want to point that out because it's my first correction I've had issue in 30 years. That's pretty good. How much? Well, yeah, try to be right. It's a good tracker. Try to be accurate. I confused Denmark with Finland, apparently.

25:35I'm going to quit now. Quickly, when it goes public, do we have a rough estimate of how much the company would be worth? Well, it really just depends on what investors are willing to pay for it. Give a number. Just make up a number. I mean, the reports out there say$1.5 to$2 trillion. That's a very wide range. $1.75 trillion, right? You're looking at the valuation per employee. 5 ,300 employees. We can look at while he does that math. We can look at also the cost that we're, you know, in terms of paying personnel, the cost of personnel, three point one five billion dollars. That's as of June 30th, the first half of the year.

26:09So not exactly apples and oranges with regard to the 5 ,300 employees. But, you know, let's say that they didn't add any employees during the three months in between that time frame. it would amount to$600 ,000 per employee in cost. So that's a pretty big delta. You've got over$6 million in terms of revenue per employee and$600 ,000 in terms of cost per employee. And as we just think about, you know, this is one company that's obviously demonstrated real efficiency as it pertains to personnel. And we know that in an AI, personnel are very highly compensated to do the work that they do because there is such a scarcity there.

26:46But it also, as we kind of think about it in the context of what AI means for personnel and for labor across the country as well. I think it's also these filings, I hope, should be a reminder to everybody to make sure that you're invested or exposed to the upside of this technology as much as you are to the potential personal disruption of it. I just think this is so important. Here's a company, Anthropic, talking about its productivity. productivity, right? It grows the more scale it has, the more chips, the more data centers, the more, more, more, more, more. You know why that's a great message?

27:19It's not a message of efficiency on the input side. So if you're invested in the inputs of this technology, Anthropic is saying we want more and more and more of them in order for us to generate more value. So you as an investor can have exposure to Anthropic. You can have exposure to everything in the pipeline. And the first thing they're saying in this filing is the more we have, the more we can do with it. And I just think that's a reassuring message. Yeah, no, you're right. Although the more that they're referring to is largely in compute and infrastructure, that their ability to get access to compute, their ability for infrastructure, data center projects, electricity and power to go forward and to grow in this country is critical for their ability to to grow as well.

28:01In terms of personnel, they do say that, you know, in terms of the use of proceeds in the prospectus, they say that some of that will go toward hiring and retention of highly skilled personnel, which is also important for personnel to get liquidity if they're paid in stock -based compensation as well. If Microsoft's basically saying we could be laying off a quarter of our workforce as we invest more into AI, like this is happening. That's a real thing. But I'm just saying if you as an investor can have exposure to the upside, this technology promises, you should think about doing that because the disruption is also going to be very large.

28:34Now, one thing I have heard in just speaking with sources is that it's unlikely that this IPO has as large of a retail component as we saw with SpaceX. If you recall, SpaceX's retail allocation was around a third of the offering size. That was very big by historic standards. Obviously, Elon Musk had that kind of cult following. They felt like that was important. Retail has become a much more active component of the market. Don't expect that same proportion this time around, but it will be there. It will be there. In the prospectus, we didn't see anything about a directed share program, which can be kind of common.

29:10That is when you set aside a certain amount of the proceeds. This could be amended, by the way, to include one. But so far, we haven't seen anything like that, which is when you set aside a certain amount of proceeds for employees, friends and family, or for customers, clients of yours. You see that more with consumer-facing companies usually, but one would argue this kind of counts as that. $330 million. Yeah. If the company is valued at$1.75 trillion and they have 5 ,300 employees, each employee is worth$330 million. Wow. If it's evenly divided. Yeah. I mean, I'm just having fun with it. But in the early days, this was like Instagram when it had 12 employees.

29:51You know, it's always like they're leaning at first. It was something like that. And then by the time they're dead, they're bloated. Anyway. Yeah. That got bought for a billion. Yeah. Think about that. Instagram was sold for a billion dollars, Leslie Picker. I know. No, that's basically like three employees of Anthropics. The two of us could buy that company now. Two Anthropics employees and you're good. Or three. What did you say? Three and a half. Oh, okay. So three. We're all liberal arts majors here. Let's just cut to the... I can do math. Carry the zero. Where is Denmark, Brian? Apparently right where the Russian ship is, Leslie.

30:28It's all good. You got this. That's where I did my bachelor party, by the way. Denmark. It's a different story. Leslie Picker, thank you. Coming up, Dan Ives on earnings, technology, and more. Stick around.

30:47It is Big Tech's Big Week. Microsoft, Alphabet, Amazon, all set to report earnings and give guidance. Investors looking for proof that the billions, trillions being poured into AI are paying off. This is Meta, seeks to raise another$95 billion to fuel its own AI ambitions with NVIDIA, AMD, and Broadcom all interested in purchasing shares. And your next guest says the AI buildup is only accelerating. Joining us, Dan Ives, partner and senior managing director at Yorkville Ives & Company. We'll get to the whole acceleration part, Dan, but what are you and your team most closely watching around earnings and guidance from those companies this week?

31:28It's the validation week because it all comes down to what is CapEx? What does spending look like from the hyperscalers? Because I think when you think about the nervousness that we're seeing intact, it all comes down to what is chip demand look like? Are enterprise accelerating as I do these AI build outs? And there is no better sort of view than what you see from the hyperscalers. I just continue to believe it all comes down to does this market go higher or low? We believe higher. It comes down to demand and what we see in CapEx. You have an interesting area where you see a lot of upside, and it's one that's kind of under fire right now, which is the neoclouds.

32:06Again, maybe you understand the guppy wipeout analogy. I'm not sure what happened to the guppies, but I do understand what Musk is saying could happen to the neoclouds. And yet you think we need how many more data centers in this country and that that's an area where there still should be plenty of capital to finance the buildout? Yeah, it's about 800 to 1 ,000 new data centers over the next 12 to 18 months. Over the next 12 to 18 months? In terms of the build out of them. Now, look, the reality is, will between midterm elections, capital, could you see, call it 5%, 8 % of those not happening?

32:36Yeah. But the reality is for every dollar spent on CapEx, there's a$5 to$6 multiplier across the rest of tech. And that continues to be our view. When you look at what Meta did in terms of the rage, you look at SpaceX, the point is for some of the neoclouds, is it going to be harder in terms of scarcity of capital? Of course. But the reality is that this buildout is happening. And I think from an investor perspective, you can't just take a sort of narrative and say, OK, that's going to be a doomsday. In my view, this is almost a SaaS apocalypse 2.0. I just go back to the original SaaS apocalypse, and that was ultimately a buying opportunity in terms of just the nervousness relative to what we saw in software.

33:13Let me just jump in with a counterpoint from Gil Luria at DA Davidson. When I asked him about the likes of CoreWeave last week, he said they're giving the whole AI trade a bad name. almost if I accuse them of just being bad actors. You sound much more constructive on the whole space. Would that include all of these aforementioned players? Well, my view is the winners will ultimately be dictated by who's able to raise capital with backlog at points where they're going to build a business that could ultimately be profitable over the coming years. So in the game of musical chairs, will some be left without a chair?

33:46Of course. But you can't just paint them all with the same brush to what you're talking about with Gill and Corweave, my view there is like Corweave's execution over the next three, six, nine months will dictate their future success. But if you look what's happened in terms of meta, you look what's happened with SpaceX, and ultimately this sort of hyperscale or AI arms race, that is not slowing down. That continues to be my view in terms of the AI trade. You can't let narratives get you off. It comes down to fundamentals. But you kind of, you mentioned the midterm elections. and I wonder if we're underplaying their importance.

34:23I watched YouTube's Sunday ticket yesterday, right? All the football games around the country. So you get ads that are like targeted people in like Nevada, Arizona. Which is the most fun part, by the way. Yeah, it is. And you're like, well, I don't see these ads in New Jersey. And they're all anti-data center. Or data centers are on the ballot. And you wonder if things go the way that the prediction markets are, which is that the Democrats are likely to take the House and the Senate both. That's not my opinion. or wish, that's just what the markets are suggesting, what if things cool off because politically they get kneecapped?

34:56It could happen. Well, we've said the biggest risk to AI is not about capital, the use cases, the fundamental sort of the AI revolution. It is the political sort of environment in terms of the grandstanding as well as a lot of the narratives that have been created by big tech. I mean, the black eye moments have really been created by them. And no doubt, as you go into the midterms, I think it's definitely created a lot of nervousness because we've said you could have an incremental 5%, 10 % of data centers that don't happen depending on which sort of, you know, wins go in terms of, you know, next week.

35:31But in my opinion, either way, it's not stopping the broader$3 to$4 trillion that's going to be spent. Remember, every data center that's voted down, China wins. I'm going to ask a question that's going to sound cheekier than I intend it to be. It's a genuine question. Is there any price at which Anthropics IPO is not something that you would want to be invested in? Look, I think ultimately call it 1.5, 1.7 trillion. As you start to get to those valuations, that's, I think, very digestible. If you start to see something get significantly above 2 trillion, I think that's what most investors would push back.

36:07But it comes down to just like SpaceX. Fundamentally, what will they do over the next 6, 9, 12 months? for those two longer-term investors as this plays out. Meaning if you were, if it were your nephew or somebody who was asking you, hey, should I get in, kind of when it goes public, maybe you can't get in on the IPO, your advice might be, if it's in that aforementioned range, sure, fine. If it's over two, maybe you wait until after the IPO and it falls back a little, as most of them tend to do. Even SpaceX had a little period of a pullback. What if you missed the, I mean, it's just, it's a hard thing to.

36:39I think it's similar to SpaceX. Yeah. Like where there's that initial period you saw pullback relative to lockup and everything else. But these are longer term stories they play. But Anthropoc going public is bullish for broader tech. It's a foundational piece of the AI revolution. And that's why I think that's a huge positive just for the tech trade. Yeah. I mean, we'll see if they raise. They could raise$100 billion. SpaceX did$75. I think they should have a big retail allocation. I think they should give people, why not talk about, even if it's not as much of an everyday household name, having these debates about participation.

37:15And then it comes down to for the average investor, the average American. You talk about AI, Brian talks about the view against data centers. You also have to make this one where it's like people recognize, first time in 30 years, U.S. is ahead of China when it comes to tech. But Anthropic plays a huge piece. So is NVIDIA, so is Microsoft. And I think that's part of this arms race we're seeing play out. All right. Great to have you here, Dan. Thank you. Dan Ives from Yorkville and Ives. Let's get to Frank Holland now for the CNBC News update. Hi, Frank. Good afternoon, Kelly. French President Emmanuel Macron said the government would announce concrete measures soon to address the concerns of high school students that have fueled unrest across the country.

37:51He said he addressed the government to respond to legitimate demands at the root of the movement. France's prime minister and other officials were set to meet with those students today. They've called for more teachers, smaller classes and better resource schools. The Vatican said today that Pope Leo will travel to South America at the end of next week as planned. The trip to Uruguay, Argentina and Peru comes as he recovers from a lung cancer surgery earlier this month. In a statement, the Vatican said there were no medical reasons preventing him from going. And the actor Walter Koenig, who is best known for playing the youthful Russian navigator Ensign Pavel Chekhov on the original Star Trek, has passed away.

38:27His talent agency says that he died today at his home in Los Angeles. Walter Koenig was 90 years old. Kelly, back over to you. All right, Frank, thank you. Coming up, we're just outside a week away from those midterm elections. We'll go into more detail about what's at stake for the markets, your money and more after this.

38:54One week from tomorrow are the midterm elections. And according According to Kelsey, Democrats have a 90 percent, 91 percent chance of winning back the House and a 64 percent chance of also winning the Senate. Here's a stat that caught our eye from Barron's. Since 1930, midterms resulting in a Republican president like we have now and a Democratic Congress like we might have, have produced an average S &P gain of 15 percent in the following 12 months. Here on set to discuss is Monica Guerra, the head of policy and geopolitical strategy at Morgan Stanley Wealth Management. Guerra, Guerra, Guerra.

39:26Thank you. OK, Guerra. Anyway, this makes sense to me because gridlock is good for markets. Maybe there are times that's not true. But overarchingly, when policy whipsaws back and forth, especially on major things like Medicare for all or what have you, every two or four years, I can imagine businesses get a little frustrated. So we're just kind of getting the Trump tax cuts and all of that going. What do you think might happen after the results next week? Well, post midterms, we do think that there is the likelihood for, you know, continued stability as it relates to legislation. That doesn't mean that volatility won't be present from a policy headline related risk.

40:02A good example of that is looking to the White House and the fact that there can be a tweet that could cause a sell off or a rally. Right. Depending on what direction it goes in. So Congress creates stability, right, when you have that gridlock dynamic between the Democratic Congress and a red president who's likely to veto policy provisions. But it doesn't necessarily negate market volatility going forward. Are we underpricing the risk of data centers not happening? Because if the whole market is based on AI spending and every commercial we've seen now is for somebody saying data centers are bad or might be bad or they're against them or whatever it might be.

40:41and those people win, theoretically, they're going to have to do what they're promising, theoretically. So I think that there is an underappreciation. I would actually take it the other way, that opposition can actually be good for data centers over the long run. Rather than getting sort of an immediate boom-bust approach on CapEx, it could actually spread or smooth CapEx coming to market, meaning you get moratoriums rather than bans. You get essentially more interplay between the local government and the private sector, incentivizing more capex because the governments want more from it on your infrastructure play, electrical grid offsets, direct subsidies right on those electricity bills in some instances.

41:27It just means that the slower time horizon could essentially create a longer runway. So we actually think it gives the trade legs. It's just not necessarily going to have the same, you know, sort of enthusiasm piece that people were initially. But the data centers, you believe, will still happen, even if we get those outcomes, which is likely a mildly leaning blue Democrat Congress. We're still and Senate and governors of some of these states. We're still going to get those data centers built. Absolutely. Because if you're thinking about the sort of shortage of revenues that states and locals are able to raise, this is a real politically expedient time to do the right thing for your constituency, right, and actually try to benefit from this move in productivity.

42:16Now, the, say, balancing act from a political angle is do we want to lose the opportunity in full or do we want to actually get those grid improvements? And that is what these governors are essentially weighing. I like this little bit of a countertrend point of view, just because there is a lot of concern right now about the midterms and the impact. Where else do you kind of break with the consensus on, I don't know, kind of topics that were important to the markets, whether they're politically or geopolitically driven? I would say that, you know, a sort of bad news could be good news opportunity is in the private equity space.

42:52If you're staying up in quality, you're going to have a democratic government that's going to essentially drill down, maybe have hearings, do more exploration. But you have to remember the same thing with AI and data centers is that legislation is going to be very hard to pass. So not a lot is going to change. So you may get a negative headline, but it doesn't necessarily mean negative fundamentals. And that's an important thing to lean into. But you think and people are worried about a Democratic Congress like we're showing there, they could turn their attention to the private equity industry broadly.

43:22I mean, I've heard drumbeats about this for years. Yeah, potentially. And in different areas, especially in health care, look at the articles about the autism centers and things like that. I mean, that that they expect they could be under some some scrutiny. Well, the thing is, you have to go through that that full litany of where can they try to move the margin and essentially use this time in Congress as a testing ground for what's going to work for 2028 and 2029. So that's a different story, depending on who wins that election cycle. But the next few years, if we get the outcomes that the again, what the voters decide.

43:53Yeah. But based on the prediction markets, we get a mildly leaning Democrat Congress. nothing's going to happen for the next two years. Nothing's going to happen. I mean, literally, legitimately, there's going to investigate Trump. Trump's going to yell at them. They're going to yell at him. But nothing of substance is going to get done. And the stock market will probably like that. It's going to be very hard to get something done. And the stock market will like it. And so that's why when we say that there's potential pockets of volatility as it relates to negative headlines, meaning that Congress is drawing attention to a specific issue or sector that they want to drill down on, the actual legislation is going to be very hard to get through.

44:29By the tips. So essentially. My words, not yours. Not my words. Not my words. But, you know, stay committed, right, to that long-run theme because these pockets of volatility are just that. All right. Monica, thanks. Great to have you here today. Monica Guerra with Morgan Stanley. All right. Did you buy Brazilian stocks because you were betting on a specific election outcome? Their election, not ours. Well, that outcome didn't happen. And now the Brazilian stock market is crashing down 20 percent. I'll tell you more next.

45:11All right. Much happening outside the U.S. Brazil's ETF on pace for its worst day since 2020. following a shock election result. President Lula da Silva winning re-election, defeating Flavio Bolsonaro in yesterday's runoff. U.S. listed Brazilian companies tumbling from the unexpected win. I say unexpected because Bolsonaro was ahead in some of the prediction markets, and the markets have been rallying into that, but now they sold off. So some of those companies, by the way, are not based in Brazil, but they're sort of Brazil-ish. Yeah, down 50 % for XP. Quick check on shares. The new core back here, they're as flat as the steel.

45:50I was going to make a reference. Like the shares are as flat as their flat rolled steel. Anyway, they report earnings in a little over an hour from now. But investors will be watching to see whether higher steel prices can offset rising costs and boost the bottom line. We'll talk about the results and more tomorrow with the CEO, Leon Topalian. You won't want to miss that exclusive interview. We'll ask him about his hot rolled steel. Yes. You know, they were the cutting edge of steel. back in the day. Maybe they still are. Thanks for watching PowerLunch, everybody. Closing bell starts right now.

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