Tech Earnings Reaction, Q3 All-America Survey, Hormuz Chokepoint Check 10/22/26

0:00We're an agent supposed to take things off your plate. Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually get stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

0:33Schwab 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 marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts.

1:02All right, big technology is selling off in a big way today as investors, really weighing two risks. The cost of the AI buildout and a new jump in oil prices. Welcome to Power Lunch, everybody. I am Brian with Kelly. Let's get a check on the markets and your money. The Dow and the S &P are lower. Not a lot, but they are down. The big trouble is in tech land. You got tech weighing on risk sentiment, the Nasdaq 100, semiconductors all deep in the red. More concerns also creeping into the bond market, the 10-year yield dipping below 5%. Oil is moving the other way, WTI higher, approaching 100 a barrel, Brent above 110, climbing after deadly attacks on Saudi Arabian infrastructure and escalating threats to commercial shipping in the Mideast.

1:43Kepler's head of commodity research, Matt Smith, is here to break down what the oil market is signaling about what may be coming next. All right, so there's a lot to do in this hour, but we're going to begin with a massive question for your money right now. Is the tech trade really running out of steam this time? And if so, what do you do now? There is a big market move happening right now. Look at some of these decliners on the AI and tech side. You've got Meta down there. Earnings came out last night. Lamb Research, Lumentum and Seagate, Coherent, all lower. But the selling is far broader than that.

2:15CoreWeave down another 10%, almost 11 % right now. Nebius Group down about 9%. Arista Networks and even Dell down 7%. And with that move, the AI power companies are also being slammed. EROC down almost 12%. TerraWolf is down 12%. Cypher Digital, Hut8 and more also lower as well. So investors are selling those names, which means they're making money. Where are they then putting that money? Well, maybe into some boring old blue chips, because look at what is working today. All of these stocks are either hitting new all-time or multi-year highs. Coca-Cola, Chevron, Hasbro, Best Buy, Keurig Dr. Pepper also hitting highs.

2:59Biogen, Amgen, Pfizer, and our friends at the NASDAQ, all at multi-year or all-time highs. So while the overall markets are lower, there are many big stocks working, which means there are stock buyers out there today. Let's talk about all this. Brian Levitt is Invesco's chief global market strategist and head of strategy and insights, alongside Prime Capital Financial's chief investment officer, Will McGough. Gentlemen, it's a great day to have you both on. Thank you both for being here. Happy to be here. All right. I've got a really deeply insightful question, Brian, to start off the show with you.

3:34Ready? Let's do it. What the hell's going on? I actually think it's a market that is being discerning, and I think that that's a positive in what I still believe is a long-term structural bull. So it started a handful of weeks ago. Everybody thought the bond market was actually bullying treasuries. No, the bond market was actually bullying some of the neocloud businesses, some of the tech companies that were a little bit over their skis. And you're seeing that filter through. There's some concern about what type of investment is being made. The reality is, though, if you look at whether it's meta, anthropic, open AI, and you look at revenue, you look at usage, you look at a lot of the numbers, it's quite positive.

4:15So I think it's a market that's being a little bit more discerning, picking winners and losers. But I don't think this is the end of the AI trade. And for all those people who thought that the U.S. Treasury market was being bullied, no, that's still, treasuries are still a flight to quality asset. But we'll jump in here because, you know, I mean, you've got NVIDIA, TSM, AMD, I mean, Micron, all these names that are investing in AI build out. So on a day like today or when the market is looking at CoreWeave and punching it in the gut, basically, does that have anything to do with the reasons why you would still be holding these stocks in the long run?

4:53Kelly, it's a great question. And what I see right now is the most honest AI bubble in history. And when everybody knows it's a bubble, that means you can plan for it. So working with our advisors, working with our clients, we can build prudent strategies around how to diversify away from AI. And you showed some of the names earlier that are up today. I want to say breadth is actually positive today. So it really shows you how narrow the market has been on the way up, but as it could be on the way down. And we're actually putting the finishing touches on our 2027 and beyond piece, which is a playbook for our team of how to approach diversifying in this new world going forward.

5:29So let me just get this right. Are you are your top holdings core AI exposed longs or is that going to be history? And you're looking you're going to be telling us, you know, J &J and Coca-Cola and health care. So here's how you have to think about it. In my opinion, we've earnings are still growing. So what's happening today is more of the rate market driving equities and spooking equities. In my opinion, it's kind of funny, like rates are backing up, which is a good thing. It's put some pressure on hyperscaler debt issuance. And what we were actually looking for is the reverse of what happened with Meta.

6:05So Meta actually was guided a little bit less capex, and so they're getting punished. We're looking for a reward there by the market as the final leg. And so I think as long as earnings are growing as the way they are right now, you have to be invested in equity and look for the signals as to when the tide will turn. And Brian, you said that the structural bear market was intact. Bull. Bull market. Sorry about that. But by the way, 1B makes a big difference. Bull market was intact. And by the way, that's playing out today. That was our point in that open was to show the viewer and the listener that there's a lot of stocks that are higher today.

6:37Big name stocks, Coca-Cola, Kelly's Pharmaceutical Companies, the biotech companies like Amgen and Biogen, they're doing well. So it's not like it's a broad market sell-off today, but people are saying, at least for today, to Kelly's point, sell anything and everything related to AI. Yeah, and you're getting a move into quality assets, and that makes sense, and what we would categorize as a bit of a slowdown in the broad economy. So is AI not quality? There's definitely parts of AI that are quality. I would still look at the hyperscaler businesses. I would still look at a company like NVIDIA as quality.

7:12What you're having, though, is a moment where investors are becoming concerned about the level of investment and are looking beyond that space. But to me, that doesn't characterize the end of a bubble or a mania. These are companies that are actually trading at quite reasonable valuations. It's a long-term growth trajectory. And there will be moments where different headlines will disrupt it. We saw it last week with the neocloud businesses. That doesn't mean it's over. What was the headline today that started to jump in? But is it just Meta's earnings and guidance? Because otherwise, there's really no direct headline.

7:48I mean, there's some stuff around the Middle East and oil's up a little bit. No, I agree. There's no direct headline. There's no big headline. Actually, I'm looking at things like Meta, Anthropic, OpenA, looking quite positive. I mean, Meta down maybe on some future investment spend. But the reality, these are companies that are deploying capital to compete in the space from compute. There's also some concerns that I'm hearing out there about, you know, an ongoing cyber incident that could be also causing some pressure that I've been hearing of. But, no, there's not big news. The demand is still quite strong.

8:22The demand is actually seems to be going parabolic at a time when we still have the supply constraints. So I would view this as a as a moment of digestion. We've got demand issues for a good period of time here. So we're talking out into the future sometime in 27, maybe sometime in 28, when the demand and supply balance is equal out and earnings start to flatline or maybe be revised down before it becomes a problem. Right now, you're just paying the toll of being a long term investor with a little bit of volatility along the way. Right. Let's circle back to bond yields, which, you know, the 10 years below 5 percent today.

8:54That is a big deal. Question is, does it stay down there? And is it down there for kind of the right reasons or the wrong ones? who wants to tackle that? So I think it's the debt issuance supply here. So the hyperscalers do a lot of debt over the summer and into the fall, which put pressure on treasury rates higher. Some of that's backed off now. We still have higher inflation through higher oil prices. So what we're seeing right now is a great income environment, probably the best income environment in a generation for investors to seek yield in their portfolios as a ballast to the equity volatility.

9:26And there's so many different ways that you could play it right now. We don't have time to go through it all. But that said, I would look at owning the rate environment here with regards to being diversified away from AI. Kelly, I thought that the move in rates was so misunderstood by investors. Yeah, the move higher was better economic activity. Inflation expectations barely budge. Inflation expectations are barely budging. To me, that's not the moment of debt comeuppance. You heard some billionaires talking about the invoice coming due. No, that's not what that was. the dollar was strong the entire time.

9:59So that was a good economic backdrop. Now you're seeing some of the flight to quality amidst some of the concerns that exist out there. The irony of it was Does that mean, though, the growth is slowing? Yeah, the economy is slowing down a bit. I mean, that's what happens when you get$4.25,$4.50 gasoline for a while. It slows down on the market. But here's what's weird about that. And I can make a case for an economy slowing down a little bit. Good growth, by the way. Very good growth. But then when I look at the new highs list for stocks, and I know the equity market's not everything, but it's something.

10:33Right. You got ADP, the biggest payroll provider in America, new record high today, MasterCard, American Express, Visa, Best Buy. Those stocks are all at record highs or multi-year highs. And you know who else is talking about a strong consumer and travel demand is American Airlines, which is not exactly None of that sounds like a slowing economy if the economically sensitive stocks are hitting record highs. The economy is not slowing. You know, we're growing here, in my opinion. And from a nominal basis, inflation rolls over. That turns into real growth, which is what we want here. Well, yeah, absolutely.

11:07And what I'm saying is if you look at the lower income quintiles and you look at consumption, it is moderating. If you look at the ISM Purchasing Managers Index, down modestly since July. So I'm not saying this is a massive slowdown. I'm saying that the bond market had gotten a little bit oversold as a result of expectations of growth. And things are coming in a bit. Nothing drastic. Breaking. Just a quick last question. Each one of you, what inning are we in of the AI cycle, if you want to call it that, Brian? Third. I'll say middle innings. So there's plenty of room to go. Plenty of room to go.

11:41Through all these ups and downs. Brewers or Rays? I think the Rays. Brewers. We have a bet now. Good. Brian, love it. Thank you. Will McGuff, we really appreciate it. We do have some breaking news down in Washington. Let's get down to Eamon Javers vis-a-vis Starlink. Eamon, what's happening? Yeah, Kelly, the Wall Street Journal has a new report out just moments ago about with new detail in this ongoing saga involving President Trump, Elon Musk, Starlink and the war in Ukraine. And what the Wall Street Journal is reporting right now is that President Trump called Elon Musk and asked him to lift restrictions on a military grade version of Starlink in Ukraine that the SpaceX chief officer had throttled.

12:25Now, they are citing U.S. officials for that report. Why is that important? Well, because we hadn't known about that call, according to the Wall Street Journal, that the president had called Elon Musk to ask for that to be unthrottled. And President Trump, until this report, has been relatively neutral in public about this. He simply said, look, I don't know who did it. I would like to know who did it. But he's been neutral on the idea of whether or not it was a good idea in the first place to throttle SpaceX technology for Ukrainian warfighters. He simply said he'd like to know the answer to who made that decision.

13:01But he said consistently he didn't do it. Now, this report is suggesting that after The Wall Street Journal's first report earlier this week that Elon Musk had ordered it, the president then called him and asked him not to do that. And the sourcing here is important, guys, because they're sourcing U.S. officials. We don't know which U.S. officials, whether that's State Department, White House or what have you. But any U.S. officials work for President Trump. So you can presume that this is the message that the president wants to get out to the world right now, which is that he not only didn't do this in the first place, but that he asked Elon Musk to undo it after it had been done.

13:38So this is sort of the U.S. government, I think you can say, pointing a finger at Elon Musk and saying he's the guy who did it and we didn't think it was a good thing to do. Now, Musk himself has been really silent about this in public. His public social media feed has been a little bit cryptic on this point. Last week, he said that all of these services in terms of government services from SpaceX and Starlink in Ukraine were under the control of the U.S. government and the president of the United States. This week, he's been quiet since The Wall Street Journal has been reporting on this. And he's had a couple of comments on social media to the effect of, you know, mainstream media gets it all wrong.

14:18So we don't know what exactly he's objecting to there. So I think what we've seen here with this new piece is this idea that the White House wants it to be known that the president was opposed to this idea and asked Elon Musk to knock it off. And clearly they're placing the blame on Elon Musk for this decision. Wow. That's a big story there. The stock is still down about eight and a half percent. SpaceX is right now. But market digesting this. And Eamon Jabbers, I have a sneaking feeling we will see you again today with more in the story. Eamon, thank you very much. All right. We are just getting started on a big day for your money.

14:50Coming up, the real story on shipments through the Strait of Hormuz. Kepler's Matt Smith is here. Plus, with just 12 days till the elections, will nimbyism rule the day on data centers? You hear the very latest from CBC's All America Survey. But up next, while your next guest says you do not want to buy shares of Meta. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished.

15:29No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. 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 marketupdatepodcast or find Schwab Market Update wherever you get your podcasts.

16:09Computers are getting smarter, Silicon Valley's getting weirder, and AI is taking over. At least that's what everyone keeps telling us. Welcome to Machine Gods, a new NPR podcast that will be your field guide to the AI-powered future. We're veteran tech journalists with front row seats to the industry. And twice a week, we'll make sure you get smarter about AI so you know what's real, what's hype, and what might come next. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

16:42Meta's revenue is growing, we learned last night, but so are some concerns about its AI spending. The company reported more than$64 billion in 3Q, up 26 % year-on-year, but it is selling off today, down more than 7%, as they signals a touch more AI spending. I think they raised the bottom half of the range anyway, and announced plans for a new class of shares. Maybe that's the overhang. Our next guest says it's still too early to buy the stock. They talk about growing competition in the AI agent race. Needham Senior Internet Analyst Laura Martin is here. Laura, great to see you. If I were to just ask you, why do you think the stock is down today, Meta?

17:17There's like four pieces of information that we got yesterday that we think are negative for shares. First is they disclosed that they had filed with the board a plan that said they needed hundreds of billions of dollars to fund their AI aspirations. Some of that is going to have to be equity. And they also disclose that they're creating a stock split by issuing one non-voting C share to every shareholder that owns a current share. So that just means they're going to do, we think, between$100 billion and$200 billion of equity over the next two years. Because what most people don't realize is this company has$700 billion of off-balance sheet debt, in addition to the on-balance sheet debt of$100 billion.

17:59So they're bumping up against their investment grade limits. They need to issue equity here. So there's no reason to buy equity in the market. Just buy it when they do a huge deal. You know, so you mentioned a couple of different things going on. Are there any more that you would add to that? I mean, is there a long-term positive that emerges through the fog? So no, because what we're getting right now is the ultimate positive, which is fabulous. Like this Muse adoption, 10 million downloads, 2.5 million users for Muse. no revenue associated with Muse. But all the good news is now they did not update their CapEx guidance for next year, nor did they update their cost increases for next year.

18:38So next quarter, the fourth quarter, we're going to get projections into 27 that I think are going to be really negative for shares. So no, I would say a lot of the catalysts in the next six months are very negative for Meta. Yeah, because I don't mind if they spend the money, not me, but if I'm an investor, Laura. I don't mind if Meta spends the money if they can make it back. But I'm going to quote Laura Martin. Apple, Google, Amazon, Anthropic, OpenAI, they're all going to have their own AI agents. Add Meta's muse into that. That's seven major ones that consumers are going to have a choice from.

19:15I mean, how confident are you that Meta can make that couple hundred billion back when, as you just said, right now there's zero revenue attached to that. Well, and the other thing is, Brian, to be really useful, you, the consumer, need to give these agents like Muse, which is Meta's, and they're the first mover, access to your bank information, every email you wrote, every browser you open, regardless of how sensitive. and then it needs to do things for you. Well, I would say because Meta has sold your advertising as data and monetized your privacy as a core business, it is the least trusted.

19:56So if I was offered an agent by Anthropic or by Apple, I might be more willing to give access to that sensitive information, which by definition would make their agents more trustworthy and useful than Meta. So I do not think Meta will win the personal agentic race. I just think it was first. Well, on that note, if it's first and if it can keep that lead, that's why people are focused on the credit risk. Laura, stay right there. Let's bring in our own Seema Modi with a closer look. Seema, you've dug into CoreWeave. Now we're looking at Meta. We've looked at Oracle. I mean, this is now the new area that the market is most attuned to.

20:32Right. But Meta's perhaps less expected than CoreWeave and Oracle. What was interesting is the messaging from Meta CEO Mark Zuckerberg and as well as the letter that Meta sent to shareholders last night where the company talked about how aggressive it needs to be on spending on the artificial intelligence build out, but also the timing, the speed at which it needs to grab that capital. I'll just quote this letter. In order to finance, its funding needs to go forward. It would need to be prudent for the company to do so because more companies have absorbed available capital in the market. So what they're basically saying is there's only a limited amount of dollars out there to fund the AI build out.

21:08And Meta needs to move now and quickly to ensure that it's able to grab those dollars before some of its competitors. It actually lists out some of them like SpaceX, Anthropic, and OpenAI does. Now, so in addition to that stock sale now that's expected, you also have the bond market reacting. They're basically reading this letter and saying this tells us further debt issuances are coming from Meta. And again, I look back at this letter where Meta says that debt at the required scale could hurt its credit rating. So now you have a number of fixed income investors reevaluating the credit ratings of all of the hyperscalers.

21:41You know, I would point out this is strongly an investment grade double A minus by S &P. But they're saying that future debt issuances are coming. And that's now a new question that investors have to think about. And that's Laura, that's what you're saying. And equity and I mean, they're going to need a lot of money. They are going to need a lot of money. They could have chosen to do nothing. Like our analyst last hour said, the shares would be higher if they had decided not to embark, he thinks, on this venture. But then where would they be in five or 10 years? It seems obvious that they have to take a big bet in order to get potentially a big payoff.

22:14I think. But I think Amazon's doing a nice job here. Every time the CEO of Amazon comes out, he says, I'm raising capital spending by 20 billion this quarter because I have demand that I can guarantee a positive return on capital. That kind of messaging, Wall Street is much more willing to fund than Mark Zuckerberg's messaging, which is we need to invest hundreds of billions of dollars and we don't know how it will monetize. Even Muse, he's saying someday we hope to charge e-commerce, you know, sort of rev shares and subscription revenue. But he's like he doesn't say when and he doesn't say the magnitude of those.

22:53So it's all very amorphous is when you'll get any return on capital on this fabulous Muse adoption. Well, yeah. And you say when I wonder if for some companies it's not when it's if, Laura. A lot of people may not realize about Laura Martin. Laura Martin, former investment banker, knows a lot about debt as well. And so what does Laura Martin think about trillions of dollars of debt that is going right now to fund this amazing build out? It is amazing. A lot of it will monetize. But what's your broader take on all this debt? Because I'm not going to lie. It makes me nervous. Right. So I think the best position companies are the hyperscalers because they have a core business.

23:31So just on Meta specifically, let's say it raises a trillion dollars of debt to fund AI. Meanwhile, it is using AI in its core business to accelerate its revenue growth rate. It is cutting costs. Its full-time equivalents are down 15 % year over year. So it is getting higher conversions and taking share of ad revenue from the open Internet. So it is using AI in the way that I think all surviving American companies must do. It must use AI to increase revenue growth and decrease costs, which really essentially is going to revalue revenue per employee up again. So the Internet doubled it. And I think, you know, correct use of agentic AI will double it again for the companies that survive.

24:17In addition to watching Meta's stock down about 8 percent, she'll also draw your attention to Meta's five-year credit default swap, which has hit a new high today. What's so interesting is that a year ago, Kelly and Brian, this instrument did not even exist. Investors didn't even fathom the idea of cost of insurance. Yes, insuring against the prospect of a default. But here we look at Meta's CDS moving here again on the expectation of further debt issuance. I would point out that even at 100, which is where Meta's five-year CDS is trading, it's still well below where Oracle and Corweave are at at this hour.

24:48All right. Seema, thank you. Seema Modi. Laura, thank you as well. Laura Martin from Needham. Still ahead, how do voters feel about a data center in their backyard? I think I know. With 12 days until the midterm, Steve Leisman breaks down the latest from CNBC's All America Economic Survey after the break. weren't agents supposed to take things off your plate building another to handle the others is a bit much don't make more work out of work gemini is the one agent that knows all parts of your business and actually gets stuff done you give it a project close your laptop and when you come back the job's finished no matter your industry or role your agent has the skills to help every team stay in their flow seriously make work less work with gemini on google cloud check response subscription required.

25:34This 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 marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. Computers are getting smarter, Silicon Valley's getting weirder, and AI is taking over. At least that's what everyone keeps telling us.

26:10Welcome to Machine Gods, a new NPR podcast that will be your field guide to the AI-powered future. We're veteran tech journalists with front row seats to the industry. And twice a week, we'll make sure you get smarter about AI so you know what's real, what's hype, and what might come next. Listen to Machine Gods from NPR on the NPR app, or wherever you get your podcasts.

26:35Less than 12 days until the midterms, and one key topic looms on the minds of many voters, artificial intelligence. And thanks to CNBC's All-America Economic Survey, we now have a full breakdown of the very latest on where Americans stand on the issue. CNBC senior economics reporter Steve Leisman is here. Steve? Thanks, Kelly. You know this NIMBY idea? We'll call it NAMBY. No AI in my backyard. The CNBC All-American Survey, we asked 1 ,000 registered voters, how do you react if a data center was proposed within 10 miles of your home? Not here was the answer. 63 % said they would oppose such a data center.

27:1222 % don't care. Just 13 % would support it. Well, who opposed it? 80 % of Democrats, which makes it look like it's a partisan issue, but it's also 59 % of independents and 44 % of Republicans. Young people who you would think would support this whole AI data thing, 76 % oppose it, 71 % of women. Looking more broadly on the important issue of AI development and regulation, we asked, do you think we should pause it until regulation catches up? 52 % say that. We also asked, hey, should you continue developing it to stay competitive with China? 32%. Looking at the breakdown, 56 percent of Republicans wanted to keep going, strong Republican men, that is, optimistic on the economic outlook and those with higher incomes.

27:57Opposed or want to wait until the regulations come along? Women ages 18 to 49, Democrats, and those in more middle income,$30 ,000 to$50 ,000. Party advantage on the issue of dealing with AI? The Democrats are plus four on that issue. 33 percent Republicans, 70 percent Democrats on the issue. But it's worth pointing out, 40 % of the public say both parties about the same or neither is any good. So there's scope for one or the other party to make inroads with the public on data centers. And scope, I would say, guys, for the industry to maybe do a better job of thinking about and addressing the public good.

28:32Guys? But in other words, everyone's against data centers for the most part. Not everyone, you know, 62%, you know. And we tried to ask it in a way that was more like, you know, if it was coming near your home. Like if they were going to build it next to your house within 10 miles of your home. Okay, well, next to your house and within 10 miles are two kind of different. But yeah, you're trying not to lead the witness is what you're saying. Exactly, exactly. But also put them in the situation of, you know, rather than a abstract data center, a data center that you might hear down the road. Do we know why?

29:06Like what's the big, is it water use? Is it energy consumption? Is it sea, all the above? I think it's the people tell me they don't want the humming sound, the noise. That's what I hear when you talk about putting one next door. I think the A.I. industry lost the thread on this. And when I read about it, Brian, you covered the county commission in your day because you've done just about everything. Do you ever cover the county commission? I have not. You know, when they approve these developments in the dark of night and it's item number three, six, two, five. I was the Sarasota County Commission.

29:40And no one's there to see it. Well, they would come out to protest it, then they'd table it and put it back on as item number three. Doing these things, we hear what people don't know about them. I just got a notice in my town of a person two doors down who is going to extend their patio in a way that won't affect me at all. But that's the law. The law is if you're going to do something. So doing these things in the dead of night, look, I think that there are places that will accept them. I've heard, for example, we talked about this on the phone the other day. We did. States of the old Confederacy, for example, that have energy surplus, they may be recruiting these data centers.

30:15Places that don't, we talked about electricity, talk about water, talk about the noise. These are things that can be overcome and are overcome in many areas. If I was a Massachusetts Democrat, right, which, you know, is likely if you live in Massachusetts, you don't want a data center because you have no power. Your power costs are already sky high. You've got to buy heating oil. Things are tight in New Jersey. We live on top of each other. You don't want a building. Nearby, there was a big sign that said data center hearing tonight, and it turns out it was a scene for the movie Cupertino. I think that's closest by area it's ever going to get.

30:49True story. In New Jersey? Yes. We're making a movie about Apple in New Jersey. Yes, for CBS. Buried the lead, Steve. And this issue, the fact that it's on a CBS primetime show over a data center hearing is all you need to know about how much it's captured the zeitgeist. Steve, thank you. Our friend Patty told me we were done. See you, Billy Smith. The NASDAQ 100 is down 900 points, and it's at session lows. Big tech sell-off. We've got a 3 % decline for the NASDAQ 100. A lot of stocks on the move. Guess what else is on the move? Oil, and after the break, Matt Smith of Kipler. He's here on set.

31:23We'll talk about the real state of oil flows in Hormuz and more next. All right, big day for the NASDAQ. We also have some breaking news on Moderna. Let's get now to Annika Kim-Constantino. With that, Annika. Hey, Brian. So Merck and Moderna are now releasing full data on their personalized cancer vaccine after a partial leak of that data earlier today. The companies plan to announce detailed results from a phase three trial on this mRNA based shot in melanoma patients on Saturday on Saturday during an oncology conference in Madrid. But the full detailed results are now out following the leak on social media platforms.

31:59And despite the pressure on the stocks today, the data is actually very positive here. Merck and Moderna state their personalized cancer vaccine combined with Keytruda, that's an immunotherapy from Merck, cut the risk of melanoma returning or patients dying by 42 percent compared with Keytruda alone in a phase three trial. That is actually in line with analyst estimates and expectations here. But there were very sky high expectations for the shot. So that's probably why we're seeing the stocks both down a bit today. And the combination also reduced the risk of cancer spreading to distant parts of the body or death by 38 percent.

32:33And the companies have characterized this data as potentially practice changing for these patients with a specific form of melanoma. And they're discussing these results with regulatory authorities as well. All right, Anika, really appreciate that. By the way, stock is down 22 percent, but I would remind viewers it's up 230 percent in the last three months, 547 percent this year. So Moderna has been red hot. It's just cooling off a little bit today. Also heating up today, oil tensions flaring again. And now there are reports that the U.S. is reportedly planning major strikes against Iran after the midterm elections.

33:08Now, keep this in mind. It's just a report. Things could change. The story, by the way, could turn out to be flat wrong. But even hints of that are sending oil up again. Oil, by the way, despite dipping in the summer, is pretty much exactly back to where it was in March. Look at that. And despite more recent attacks on ships, oil is getting out of the Arabian Gulf. Ralph Kipler says Middle East exports averaged more than 24 million barrels a day last week, and that would actually be above pre-war levels. Joining us now on set, Matt Smith, director of commodity research at Kipler. Glad to have you on set, Matt.

33:41Good to see you. One week doth not a trend make. It's a good trend, but it's one week. And when I look on your maps at marine traffic, which you guys own, I see ships, but I don't see as many as I used to. So what's the status of shipping in the Arabian slash Persian Gulf? Yeah. So the numbers are so strong. The thing that is doing it, though, Brian, when you look on it, it'll kind of vary from day to day, right? But it doesn't take that many VLCCs if they're 2 million barrels of slug to get to a high number. And so on some days, we've seen over 20 million barrels passing through. Ten ships. Yeah, exactly.

34:17Yeah. And so there's that piece of it, right? And so that lifts that seven-day average. It's not worth cherry picking and looking on a single day. The next day may be very, very low because of the way they're taking those convoys through. But when you look at what is being loaded in the Red Sea as well, because that's really has picked up, too. You combine those numbers. That's how we get to those above those pre-conflict. But as I've reported, we've reported here at CNBC, it's expensive, right? Shipping rates are over a million dollars a day, depending on the route. Not everywhere, but depending on the route.

34:46You've got the U.S. Navy. Go Navy. But that's expensive and dangerous to risk those ships. You've also got, and I've got these crazy reports from insurance companies about, you know, ship owners are paying sort of ex-UK special forces to pay the Houthis and say, don't blow up that ship. I mean, there's crazy stuff going on there right now. Like, what is the real, and a lot of ship owners still, Matt, won't go there. Yeah. So what is it like there? But you've got, like, SinoCore, they're moving a lot of that crude there. So it's like high risk, high reward. Those are the ones that are doing it.

35:18You've also got that. Yeah. And you've also got the national oil companies that are doing it as well. And so that's what's really driving on those numbers. And the thing is, it seems they're playing a game of percentages. And so if you're taking through 10 tankers rather than five, and there's a 10 % likelihood of one of them getting hit, you're still getting more volumes out. And so that's what we're starting to see on a kind of a consistent basis there. And those barrels are heading predominantly into Asia. Because we're trying to rectify a couple of things at the same time, which is, as we understand it, Iran is running out of crude because of the blockade.

35:51And they're running out of currency because of the blockade. And their economy is on the verge of collapse because of the blockade. And that's why they are acting more aggressively, potentially. But also we have these reports that more is getting out of the Strait of Hormuz, which seem to be coming from yours and others. So that's a lot happening at the same time. The blockade, in effect, I mean, that's a position of more strength, I think, that is masked by the fact that oil prices are where they are. We're only$14 off the highs this year of Brent, I think. So if oil prices were down, we might think, OK, the U.S.

36:29is exerting its leverage over the strait. We're getting product out and Iran's under pressure. But because we're watching oil prices take off again, it doesn't really it feels like that's the bigger tell, I think, for a lot of people about kind of how this is going or what's happening. Yeah, absolutely. And we're seeing Brent prices absolutely ripping today. But you look at that December 27, 2027 contract there of$88. That's at a record as well. So you're seeing further along the curve rising. And that's kind of ironic in the situation that once we get this situation resolved, you know, knock on wood, straight opens back up.

36:59You're going to have a lot of additional supply coming to the market, not just from someone like UAE who has left OPEC. They could be up like 800 ,000 barrels a day of production next year. You've got OPEC that has unwound production cuts when they haven't been able to get the barrels out. non-OPEC coming to market as well. But we're in this situation right now where there is such an amount of risk involved here, such a risk premium. That's why those prices are continuing to push higher. You just said UAE going 800 ,000 barrels a day up. There were 3.1 million barrels a day under the OPEC quotas.

37:28So you just kind of referenced 4 million. I spoke with somebody in the UAE a couple months ago, and I said, you know, you go into 4, and the person looked at me, kind of smiled and said, maybe closer to 5. So the flows could be there. But going back to your Sinicar comment, Matt. So there's a lot of China oil going through Hormuz. And I've got to imagine that if Iran knows it's China oil, they're not going to trouble those ships because that's their main trading partner. Yeah, absolutely. And so you have... I mean, I'm speculating, but it seems logical. You don't blow up your biggest trading partner.

38:01Right. And you've got like a number of these different countries are sending it predominantly into, like we would say Saudi Arabia. A lot of those ships are not doing those ship-to-ship transfers, they are just going out and going straight to China there. And so we are seeing those Chinese imports picking up. But these opportunistic purchases, it's not like China is charging back into the market by any means to be buying prices at$130,$140 here. So where do we go from here? What's your likeliest guess? You were talking just about with the escalation from the Iran side of things, you know, it's almost like kind of scorched earth.

38:33The worst things get for them, the more they're going to lean into that. We've got the midterm elections coming up in 12 days here. You know, they are agitating, right? And they're going to continue to escalate. We've heard just today that they were hitting ship-to-ship transfers in the Mideast Gulf there. You've got the Houthis that are targeting Saudi energy infrastructure, airports. And so I think the next 12 days is going to be a wild ride here. The challenge then becomes, once we get through the midterm elections, what is the decision of the US administration? Is this building up to a crescendo or is this going to be a massive escalation after that.

39:05And we don't know. And let's pray for peace. But if what the president himself has said is accurate, if some of these reports are accurate, that there might be a return to kinetic or sort of actual war after the midterms with Iran, those ship owners, and I've talked to many of them, they're going to get the heck out of that region. Yeah. We could have an Arabian Gulf where there's almost no ships in there because nobody wants to get trapped. And I know you just did a panel with Lois from International Seaways. They won't put their ships in there because they don't want to get stuck. Makes sense.

39:37Right. Yeah. So I do worry if that happens, Matt, then we go way back down. I don't think we do. I think it's the opposite. I think it's that risk reward that we're seeing exactly happening now that they're just willing to go for it because there's so much so much benefit in terms of cash. And so I think that that's not really they're willing. So they're willing to roll the dice for money. Yeah, that's I mean, let's be honest about what's happening here. These are ship owners that are willing to risk their crew's life. And I know some of them are paying the crew. They're saying for$100 ,000 bonus, make the run.

40:12And a lot of these crewmen who are not in a position to argue over money, they will make that decision. Everything comes back to economics, right? It's really unbelievable. Matt Smith, it's unbelievable that we got you on set here. Glad to be here. Thank you. Did you take a ship here or how'd you get here? Airplanes, planes, and automobiles. It works, doesn't it? It's going to make a reference to the Russian diesel ship. But for another time, Matt, thanks. Thank you. Let's get to Frank Holland now for a CNBC news update. Hi, Frank. Good afternoon again, Kelly. Senior Advisor to Health Secretary Robert F.

40:40Kennedy Jr. is reportedly stepping down from his job, according to the Journal. Kelly Means quit his role because of frustrations over delays over implementing Kennedy's Make America Health Again policies. Means said in a statement that he leaves with tremendous respect for Kennedy and for President Trump. The CDC says it will soon require people arriving in the U.S. on international flights to sign a statement saying they have not been in the Democratic Republic of Congo in the past 21 days. That move follows Nigeria's first Ebola case in more than a decade, which was reported this week. Nigeria is the fourth African country affected by the fast-spreading outbreak, which began in the Congo.

41:16And CBS Sports announced today that former Texan J.J. Watt will take over as the lead NFL game analyst in a multi-year agreement with the network. He will replace Tony Romo, who parted ways with CBS earlier this month following his drunk driving arrest over the summer. Watt joined CBS Sports in 2023 as a studio analyst and was moved to the broadcast booth last season. Kelly, back over to you. All right. Thank you very much, Frank. Still ahead, is it time to play defense? Defense. Our tech, as tech sells off, our market navigator is looking at names that could hold their ground. More after the break.

41:50Welcome back to Power Lunch. I'm Dominic Chu. Time now for your Market Navigator segment. Are the AI and tech trades losing some of their luster? Our next guest says that AI has absorbed so much attention lately that we're overlooking other key areas that could be poised for some outsized returns. Joining us now for the case is Matt Powers, managing partner at Powers Advisory Group, and he's talking about the forgotten fundamentals. So, Matt, everything is touched by AI. Let's just say that right off the bat. But there are certain companies and businesses that are not directly tied as much to this AI trade.

42:23How exactly are you screening for these companies and why are they attractive? Yeah, Dom, thanks for having me. You know, I think moving into next year, we're going to see a market where the S &P itself doesn't move. But you'll see a large share of index components outperform. And here's why. Here's the number. So five stocks make up over 90 percent of the returns in the S &P since the middle of the year. A third are in drawdowns of more than 20 percent. And you have close to 40 percent of all stocks in the S &P down this year. All this in the markets within striking distance of all time highs.

42:54So it's simple. AIs absorb so much attention, like you said. And there's just this large group of overlooked companies. You could call it the tangible economy that have been kind of left behind. And so this isn't necessarily a sector call. I mean, the completely different businesses, completely different industries. But what they've got in common is that businesses are doing a lot better than what the stock price reflects. Give us the list then. What couple names are you looking at in particular? There's a bunch. But first is TJX, TJ Maxx. Stock's been on a tear the past month, up somewhere around 15%, 16%.

43:24They beat earnings the past four quarters straight. And they're looking at double-digit earnings growth moving into next year. But they're kind of insulated here regardless of what direction we go with the consumer. They'll capture the trade down traffic if spending does slow. And then ProLoges, ProLoges, largest industrial REIT in the world. They just reported last week and they beat on both the top and bottom lines. Stocks off from its July highs, which has kind of given us like a bit of a gift of an entry point. It's off mainly macro concerns, the 10-year rates. They've pulled back on some of their development, but does not make them a bad company.

43:59Just prudently run, excellent dividend grower. does trade at 41 times forward, but that's about 20 % lower than where it was at the beginning of the year. So bottom line here is that we need to be looking at these companies that are in this group that have forgotten fundamentals. Again, you could have a pretty average year here towards the end of the year on the S &P and into next year and have decent returns if you're owning the right group. All right. TJX and Prologis, Matt Powers with The Trade there. Thanks very much, guys. Brian, I'll send it back to you. All right, Dom Chu, Dom and Matt, thank you very much.

44:30Coming up. We've got semiconductors at session lows. The SMH down nearly 6 % right now. The NASDAQ 100 was down nearly 3 % earlier. Jay Woods up on what he is seeing next on the trends in big tech. Stick around. Welcome back. We're following the sell-off in tech. The NASDAQ 100 down 900 points. Look at the chips. SMH, well, SMH, as they say, down almost 6%. Let's bring in Jay Woods. He's the chief market strategist at Freedom Capital Markets. Jay, opportunity here. Where would you be seizing it and where would you be staying away? Yeah, I think we're on the verge of a washout in this tech trade.

45:09The semiconductor index, you showed the chart there. It's down 5 % today. It could, over the next two to three days, really flush out. We haven't gotten to serious oversold conditions. We haven't tested that 200-day moving average. So I'm looking for it to get to 510, 500. And then when you look under the hood, thank goodness for NVIDIA, which makes up 20 % of it, it is under pressure, but it's not as much pressure as we saw with land research today, breaking down Broadcom symbol, AVGO, also breaking down. So we see fundamentals that are strong, but technicals that look awful. So what you want to have are levels and shopping lists ready to buy if this does accelerate, because I think we've seen this rotation in the market.

45:52And when you look at the leadership, you don't want to see McDonald's, Nike and Pepsi leading the way higher. It's not going to take the market much higher than where we are now. These are relief rallies and these tech stocks are giving us opportunities. The question is, how do you attack it? I say slow and steady at different levels and have that shopping list ready. Yeah, I imagine there would be, you know, investors like yourself out there who would say, OK, you're selling off CoreWeave and Lumentum and AMD. And I mean, these are and Caterpillar, right? These are completely different business models.

46:23They all have something to do with the AI story, but you really got to know the nitty gritty to understand which one of those is a huge opportunity and which one might have more downside. Yeah, without question. And the core weave is the one you worry about. And that is what's really accelerated some of the fear in this market because of the bonds and the debt issuance. So core weave is one I wouldn't venture to touch. There's not enough information technically. But when I look at Caterpillar, I'm concerned about the breakdown. But when you back it out fundamentally, the stories have not changed dramatically.

46:55The earnings are still there. So to me, this still bodes opportunity. It's just a question of how you limp into the trade. So Caterpillar, I've already limped into that trade and I'm feeling it a little bit as it broke down, that longer term uptrend. But I still believe over time we're going to look back and say this is where we want to put money to work. A lot of it has to do with the rhetoric around the election and the not in my backyard and the fact that both sides agree that this AI story may be put on pause. Once we get through this narrative and get through the election, I believe we will be set up to end this year much stronger than where we are right now.

47:31Okay. Any chatter out there, Jay? Maybe there's not about some sort of hedge fund having problems. We saw it a couple weeks ago with situational awareness. Yes, there has been chatter. We remember situational awareness very well. We haven't seen anything to that liking. But yes, it's in the back of traders mind. And right now people are taking profits in some of these big winners and they're getting money ready to buy it either a cheaper or look for opportunities in some of these beaten down names like staples, utilities and health care. So maybe they're selling to raise the money. Exactly. It's what they do.

48:02Because there are stocks being bought. Biotech being bought today. Pharmaceuticals being bought today. A lot of stocks are rotating. The rotation happens quickly. And I think we're going to rotate rotate back into tech right before or right after the election is final. Jay Woods, Freedom Capital Markets, Jay, appreciate you jumping on with us here from the NYC, Jay. Thank you very much. And thank you for watching Power Lunch, everybody. Dow's down 120. We're heading kind of back towards session lows, it seems. Yeah, big next hour and closing bells got it now. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

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