11AM Hour: Stocks Rally After Midterm Elections, Circle CEO on Earnings & CVS to Split Up 11/4/26

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0:48Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Cantania with Sarah Eisen, live at Post 9 of the New York Stock Exchange. Today, the midterm election rally as Democrats gain control of Congress, both the House and the Senate, for the final two years of Trump's presidency. Lazard Asset Management CIO Eric Von Nostrand is with us to discuss the implications for your portfolio. Well, as cryptocurrencies we're covering this morning, does the Democratic wave potentially slow deregulation for digital assets?

1:24We'll discuss with Jeremy Allaire, CEO of stablecoin issuer Circle, which also delivered an earnings beat for the quarter. And despite some broad gains for the Nasdaq, chip stocks not really taking part in the rally amid concerns about what may be in store for the AI build out after the changing of the guard in Washington and to some degree in Texas. We'll discuss. Yeah, we're going to start on the midterm elections and the impact on the economy. Mackenzie Cigallo is covering the impact on the tech space and the data center build out. Leslie Picker covering the impact on banks. But first, we do have some breaking news.

1:55Megan Casella has that for us in Washington. Megan. Sarah, we're just hearing for the first time from the vice president, J.D. Vance, really reflecting on the results last night. And what he says is that the reason Republicans lost the way that they did is squarely because of the Iran war. He has this quote in a long social media post. He says, the reason we lost is the war. If you'd like to argue it was worth it, that losing the Senate for the next six years was worth it, then do so. Argue it was a worthwhile cost to pay. Agree or disagree, that's at least honest. But everyone knows why we lost.

2:27Guys, really trying to create some distance here from the White House and from the president as well. Vance says in the post that the president himself agreed with this last night. And President Trump did talk about the impact of the war and of gas prices. But his answer was different. He was telling Fox News, I don't think it's the war. I think it's the gasoline price. People agree with what I'm doing on Iran. but they probably weren't willing to do the short-term consequence, as he said before, of paying that higher gas price. So some difference there, some daylight between the president and the vice president.

2:56Now, the vice president, Vance, in his social media post also spoke about how Republican turnout was really quite good. But he says the issue was that a lot of Republican Trump-Vance voters from 24 were angry and voted for Democrats this year. And he says he was talking to pollsters about what would bring those voters back. And he listed these four points. It was ending the war, focusing on the cost of living and inflation, putting America first and changing the U.S.'s relationship to Israel. So, guys, some soul searching beginning to happen among Republicans here. And amid so much talk about Vance's future political ambitions, you could look at those points and think maybe that's the beginning of a 2028 platform.

3:35Guys, and also some scapegoating. I mean, if you look at the exit polls, liberals, Megan, in some of these in some of these states, South Carolina, Texas, Iowa, Kansas. I mean, a lot of them, you know, showed concerns about corruption, about tariffs, about, you know, ice going overboard. It wasn't as it wasn't like all about the war and blaming Israel. Absolutely. I mean, it was very clear. There's pretty much two prongs here. It was the economy and it was corruption. And however people decide to define that, it's not like it was just the war. Of course, that's playing into it because of the gas prices, probably, of course, the most visible high price.

4:10But the tariffs and other things that have happened to increase inflation, all of that playing into this. So, yes, some scapegoating here. Vance has always been a notable voice in the administration that's been the least into this war. He wasn't supportive at the beginning. There's been deep reporting from The New York Times and others about that. And he also has been leading the negotiations to try to make a deal, clearly now digging deep on that. It's very you're very right that the exit polls don't say, oh, it was just Iran that led to this result. He's, though, pointing the finger and saying that was clearly it.

4:42Although energy, definitely a big trade today. We got Brent below 100 for the first time in almost a month. Thank you, Megan Mayne Casella. Let's get to Mackenzie Sagalos as well for the impact of the election on tech. Morning, Mac. Hey, good morning, Carl. So for tech last night means a much tougher Washington. Within hours, you had Democrats like Progressive Caucus Chair Greg Kassar promising to put AI CEOs under oath. And then the likely next House Oversight Chair put out a two-word statement, lawyer up. Elon Musk took one of the biggest hits. He spent nearly$500 million on these midterms, almost half of it in Texas, and lost both of the state's marquee races.

5:19That is a warning for the wave of tech companies and founders who moved to Texas for a friendlier business climate. But voters' clearest message on AI was about data centers, and they got to weigh in on them directly. With 41 local measures on ballots in 10 states, and in Ohio, voters moved to block a data center that was already under construction. Now, Democrats who ran on pausing or regulating new projects won Senate seats in Ohio and Texas, along with key races in Wisconsin, Michigan, and Georgia. In Ohio, home to OpenAI's proposed 10 gigawatt site, Sherrod Brown unseated a sitting senator, calling him the face of data centers.

5:57In Texas, though, on track to become the world's biggest data center market, voters also elected a new governor who wants to pause new projects until there are tougher rules. With a likely Republican legislator, how much changes is still an open question. A lot of pressure showing up in the neoclouds this morning, which borrowed against their GPUs and are most exposed if projects get delayed. But the hyperscalers they're holding up since the AI trade already sold off before the election. The bigger question for them, though, is debt. The projects most at risk are the ones that are planned for 2028 and beyond.

6:30And that's what names like Google are borrowing to build. And guys, I mentioned those 41 ballot measures across 10 states related to data centers. We are up to 39 of those ballot measures successfully passing where voters wanted some kind of restriction on the construction of data centers. A really resounding sign here that this was a swing part of the platform in the midterms. Yeah, we were chatting earlier this morning about some of the votes within those restriction measures. Not that close. 75, 80 percent for VF8 Mac this morning does say that there's the potential for companies with the most existing and permitted capacity, like Amazon, they might get higher medium-term revenue, less risk of sector overcapacity.

7:14I mean, that's a big move in Amazon today. It really is. And I also, I mean, when you think about the hyperscaler set and the people who've been in the data center business for 30-plus years in Amazon or Google, a lot of these names have well-established relationships with local communities, but also with the regulators and with the local grids. And when you look at an example like Texas, for example, Greg Abbott, before he lost his election, had put into motion a measure that's going to be decided in December that will kind of decide who for the ERCOT grid, Texas has their own grid separate from the country, who's going to be able to continue tapping in.

7:46So it's not as though we suddenly see this full changing of the guard. And with Google, I was speaking to their power chief. She said so many of these deals are already locked in through 2028. So when they're thinking about zoning new capacity, it's really something that will come up in two to three years from now. Yeah, but it's more headaches. That's why Elon Musk says space is looking pretty good right now. Mackenzie, thank you. Mackenzie Cigalos. Now let's get to Leslie Picker for the impact on the banks. Leslie, what are you hearing? Hey, Sarah. Yeah, bank stocks are higher this morning. A bit of a relief rally after some choppiness heading into the midterms, kind of similar to what Mac was just talking about with tech.

8:22Today's moves underscore more of a macro and technical response. The decisive wins remove this layer of political risk that's seen as a positive for the broader economy of which banks are beneficiaries. As Citi describes it, the midterm results present a, quote, mixed but manageable outlook for the banking sector. The blue sweep is unlikely to have a major impact on the sector's day-to-day since its regulators are likely to stay the same. So reforms of capital requirements, supervisory priorities, testing processes, those plans are expected to proceed, although maybe a little bit slower than before, possibly.

8:57T.D. Cowan says, though, that the loss, quote, loss of Republican control still hurts the direction of travel for the bank space. They say that the results imply there will be a pullback of, quote, bank friendly policies and voices in power, as well as newer uncertainty introduced in areas where the president and Democrats may find common ground. The firm notes that, quote, fortunately, the current strong regulatory backdrop still remains in place. TD notes some of the key issues that could impact the industry include things like increased odds that bank CEOs will be called to testify in front of Congress, a potential cap on credit card interest rates, limits on bank share repurchases, and additional noise surrounding the AI infrastructure build-out, which the big banks in particular have been key to financing, guys.

9:48What about the alternatives? What about the private credit and non-bank lenders that have become so important in this economy? Are they facing any backlash from the Democrats on regulation? You know, it remains to be seen. I think they have kind of a similar benefit of the regulatory apparatus staying the same, the leadership staying the same, at least for the next two years. So from that perspective, there shouldn't be, you know, too much additional noise based on what we've seen so far. But it's a good question. I think the biggest impact would be kind of what happens with rates. If there is more of an appetite to get the deficit under control, for example, and you see yields fall, what does that mean for the potential returns for the private credit sector, for example?

10:33What does that mean for the potential financing costs of private equity, which, of course, is a double-edged sword for each of those? And what does it mean for credit quality? So as long as the macro backdrop holds up fine, that should be relatively stable. But again, it could also create maybe additional noise, at least from the perspective of, you know, who is in charge of the committee and what types of information and subpoenas they pursue as a result of, you know, maybe a bankruptcy or something like that that comes up. Leslie, thanks. A lot more to come. Leslie Picker and Mackenzie Segalos on some of the impacts today.

11:09For more on the impact on the elections on your portfolio, let's bring Lazard Asset Management CIO Eric Von Nostren, also served as Assistant Treasury Secretary for Economic Policy under Biden. Welcome back, Eric. Good to see you. Good to be with you, Carl. Sounds like you think, as far as supply-side levers go, power still remains with the executive. I think that's basically right. I think, you know, one thing we've been thinking and writing a lot about at Lazard is that the economy and markets overall are shifting from a pre-AI focus on demand management, how much consumers are going to spend, how much customers are going to stimulate, to the supply side constraints, the geopolitical risk, the AI productivity shock that have really been driving markets in the past couple of years.

11:47And I think the reality is that those sources of risk for markets, things like tariffs, things like energy policy, things like sanctions policy, they're still mostly in the White House's hands. These results matter a lot for the long-term direction of our economy, but for investors watching the short-term, how the policy environment's going to change, I think the big themes are going to stay relatively constant. So does today's relief rally about maybe no contested results, no DOJ lawsuits, things like that? I think if you squint, Carl, at the intraday results overnight for when the markets really jumped, they jumped on the president's assertion that he was accepting the results.

12:23So I think a lot of this is the risk of a big contested issue of historic, unprecedented proportion coming out of the market. What's interesting to me is what we're seeing in energy space, that there's so much more relative calm in an oil market where, from my perspective, the president's electoral constraint now kind of in the rearview mirror. And that, to my mind, increases the risk of further escalation in Iran that could further tighten energy prices. Even with his vice president coming out and saying we lost because of the war? That's super interesting. I would say that the apparent conflict between them, you know, the vice president saying it's the war, the president saying it's energy prices, those two things are pretty closely linked from a markets perspective.

13:01Well, I mean, I kind of get it, right? Because maybe this hurts J.D.'s own chances for 2028 if it's just seen as a continuation of Trump. I think that a lot of the conversation within the Republican Party is going to be over what the drivers of this loss mean and whether to what extent they intersect with the chokehold that President Trump has had over the Republican Party over the past decade. And I think some of these comments are indicative of some of that fraying under the hood. The markets seem to be voting for more calm. And that's what surprises me, because I think the uncertainty around what's going to happen in Iran in the coming months just went up.

13:36You also sort of remain focused on just supply shocks in general. And you've talked about we've been through, what, half a dozen over the last decade. Yeah. And you think to take your eye off that ball is dangerous? Well, I think investors used to think, and this is how the Fed used to operate, we used to think we would look through one-time supply shocks. They didn't tell us anything about the future. All that conversation about one-time price shocks aren't inflation. What we're seeing now is the table stakes of the drivers of global supply shocks have changed as the United States' role in the global economy has evolved over the past couple of years.

14:13So now I think when you get a supply shock, that makes another supply shock more likely. So it does tell you something about the future. It tells you that these constraints on our energy supply, these questions about the extent to which productivity can go globally, are persisting and getting bigger. And that's something the Fed can't look through, And it's something our policymakers and investors can't look through either. This has been your thesis, right? Higher rates for longer is going to be a headwind. Yeah. So you don't see it changing. Well, I think the direction of travel is going to remain consistent.

14:45I think there's going to be a lot of optimism in the narrative in the near term around the extent to which a more regulated AI sector can still deliver productivity upside without some of the downside around overbuilding in the very near term. So I think that's going to lead to some broad global growth optimism. But I think it's not going to be long before the negatives of these global supply constraints, particularly in oil space, particularly in tariff space, come back into the conversation. We haven't really talked much Fed today, but I wonder if you think the results are net positive for Fed independents, for example.

15:22I've worked around the Fed and worked with enough Fed officials to really believe them when I know they when they say they take their independence very seriously. So I don't think the election itself is going to have much variance on near term monetary policy. But this broader issue we're talking about, the frequency of supply shocks, absolutely will. And one of the implications of this supply side story, I think, is that the Fed can't look through these big supply disruptions in the way they used to. And I think the Fed's going to be looking on margins to bias itself in a tighter direction, to bias itself toward a bit more higher rates on the back of concerns that the oil shock might be much more persistent than it frankly feels like this morning.

15:59More than the market's pricing in? More than the market's pricing in this morning, for sure, where there seems to be a little bit of calm, a little more calm than I think is justified by the geopolitical fundamentals. But I think as we see continued escalation in this space, this oil story isn't going away. And do you think ultimately that slows down the economy? They keep hiking? I think it slows down the economy as a second-order effect. But I think the first-order story is the inflation numbers are going to continue to look high on the back of that, both from energy prices directly and, importantly, something we don't talk about enough, their pass-through to food prices.

16:32And that's something the Fed's going to need to encounter with as a first-order effect. We have talked about the difference between an energy supply crisis and a food supply crisis because food's grown through the course of different seasons. And, you know, people say that there's nothing more salient than gas prices in the United States. Food prices, when they move, paint an even more aggressive story. All right. Thank you, Eric. Good to be with you guys. I'd like to consider. Eric von Nostrum. Much more on the midterm elections coming up when we speak with the CEO of Circle about how the results could impact the crypto space.

17:05We're also going to break down the latest quarter there as well. We'll talk about how the elections might impact health care policy moving forward as well. with the Dow hanging on to these remarkable gains. As we said, best day in several months of 1 ,300 points. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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18:57Happy holidays from House of Burl, Burlington.

19:03Welcome back to Squawk on the Street. Take a look at shares of Circle Internet Group getting a slight boost after posting beats across the board in Q3. The company also announcing a 5 percent headcount reduction in the earnings release. This all as sweeping Democratic victories call into question the future of crypto regulation. Joining us now first on CNBC is Circle CEO Jeremy Eleanor. Welcome back. It's great to have you. Thank you. Great to be here. I mean, there's a lot to talk to you about today. Maybe first just on the elections and whether you feel there are going to be implications for your space because of the result.

19:35Yeah, look, I mean, Circle's business is a very global business. You know, the vast majority of the activity that happens with our digital dollars is in other parts of the world. We have had to work with political leadership in countries around the world and in the United States for nearly 14 years. So what I like to say is circle is purple. And that's very important. We need we believe that policy, whether it's stable coins, which we had the Genius Act pass last year, the only major piece of bipartisan legislation passed in this Congress, a near supermajority in the Senate and overwhelmingly overwhelming support in the House.

20:16So it's a bipartisan. Our business and what we do in digital dollars are a bipartisan issue. And we want to work with leadership in every political party and in countries around the world. So my view here is that, you know, Democratic leadership care about this. Republican leadership care about this. Policy will continue to iterate and get forged. And so we'll just continue to work with policymakers and governments like we have for the last 13, 14 years. Republican lawmakers typically been friendlier to your industry. Look, I think if you look at the legislation in the United States, if you look at the Genius Act as an example, prior to the Genius Act getting across the line, it was basically almost across the line, what I like to call the McWatters Bill, which was worked on for many years.

21:00There are some changes in it you could argue about. Is this more industry friendly or not? I think generally Republicans have wanted to build regulations that work for industry. That's been a part of the communication there. But I also think, you know, as this technology becomes mainstream infrastructure, and you see that here, I mean, ICE themselves were sitting on this, you know, on the floor here. Everybody in capital markets, in banking and payments and technology companies, they're all moving to build on this. And those all of those companies, you know, are important to political leaders no matter what side of the aisle you're on.

21:40Have we had a chance to talk about finance yet? Right now. I mean, what's is there are there will there be fallout from something like this? Yeah. I mean, look, a couple of things. I mean, one, one of the things that we announced in the quarter was a an expanded five year partnership with Binance. They reach 77 percent of of kind of of their customers are in emerging markets where digital dollar demand is very high. They're a critical distribution platform. It's very important. And what I've been saying is this. For the last three to six months, we have been seeing extraordinary change in the velocity of the attack vectors from a cyber perspective, not just in crypto, but in every infrastructure.

22:25We see it every day. It's accelerating. A gentic infrastructure is attacking infrastructure at a scale and velocity that we've never imagined. And so that impacts every company. So what's been happening is that, you know, firms, industry and law enforcement are moving at a faster pace and moving at a faster pace and needing to respond to these things. And so the wake up call, I think, happened, you know, really six months ago when it became clear that Frontier AI was going to be capable of things that human centered operations were not. And so we're seeing that play out. Now, I think Binance is an extraordinary platform with extraordinary liquidity, distribution capability.

23:09And they've actually started to see net deposits now coming back into the platform. You know, I think this will shape the dialogue around how you secure this infrastructure, more safeguards that are needed. It may affect policy as well. But, you know, this is not like the run on FTX that we saw. There's nothing like that at all happening. I'm curious what you're hearing from your own customers and your institutional partners about whether it shakes confidence in the system or if it strengthens the case for a regulated USDC coin. I mean, look, we obviously operate. We're a rule of law company, as we like to say.

23:46And we're, you know, our infrastructure itself. I mean, Circle's infrastructure gives us tools that are regulatory requirements to be able to, for example, freeze and seize assets on the networks. It's something not even in the correspondent banking system you can do. So we have built infrastructure to deal with these kinds of security risks. I think my view is, yes, this will impact future regulation. But my point here is that this is a kind of a critical moment for every industry that has any kind of important infrastructure or asset. And the risks that society faces are vast right now. Right.

24:26I mean, the way you describe the pace of acceleration in attempted attacks makes me wonder if you think a large scale failure, I don't know how you want to define it, is inevitable, likely, possible. Look, I don't want to be a P-doomer, as they say, but I think when you see the, this has nothing to do with crypto, when you see the issues that are coming up in operating systems, in the kernels of Linux, in all these deep, deep systems and the vulnerabilities, these zero days, etc., it inevitably means that you're going to have some significant issues. And those are going to be across industries.

25:06This isn't just specific. But I think one thing that we care about and one argument for crypto as a technology is it actually provides cryptographic computing and infrastructure provides the potential for greater resiliency in the face of this new environment. And so upgrading our financial infrastructure to these new types of security systems actually can advance the safety of the financial system. I want to talk about the business for a minute because, you know, you did just report earnings. One thing that jumps out here is that you just launched weeks ago, ARK, right? This is the this is the blockchain built specifically for institutions.

25:47Yes. And already one and a half billion dollars of assets. That's right. 30 billion dollars of USDC volume and roughly 500 ,000 daily transactions. transactions. What's working better than expected there? Is demand better than you thought? I mean, we've spent quite a bit of time building this infrastructure. We've built it alongside many of the world's leading financial companies, the New York Stock Exchange, Visa, MasterCard, BlackRock, many others. And it's built for, you know, it is built for mainstream applications that are going to be running on these networks. And so we're very pleased to see that transaction volumes, to see assets getting deployed, real dollars, real assets getting deployed, and starting to see that payment volumes from our own payment network driving volume on this.

26:34So it's early days. But how big can it get if you're talking about a real financial network here? Our view is this is a new race, and it's a race to build the economic operating systems of the Internet. Like we had cloud operating systems, which are like Google Cloud or Amazon or Azure, these economic operating systems are going to be some of the most valuable networks to be built over the next 10 years. These are networks themselves where the network will be valued in the hundreds of billions of dollars over time. That's the opportunity set. We're in the early days of that new race. And that's why the stakeholders who are investing in it, who are governing it, who are running it alongside us, many of the world's leading financial companies, are making that bet as well.

27:21And we're monetizing it. I mean, that showed up this quarter as well. We had 85 percent year-over-year growth in our adjusted EBITDA. Our adjusted EBITDA margin reached 70 percent in the quarter. And that's because of some of the early monetization we've seen from our... But also the usage of USDC is growing fast. Yes. I mean, this is the big story here is two things. The utility of USDC continues to expand. 79 percent of stablecoin transaction volume is in USDC. And that's grown significantly year over year. So the transactional volume, when institutions and others choose to settle, they're using USDC.

27:58And the other is the liquidity. We had a record quarter in terms of the minting and redemption. $208 billion of USDC minted and redeemed. Think about that as the pipes between the existing banking system and the internet and enabling that value to flow between them. That liquidity far, far exceeds any other player in the space. It's highly global. And it is a measure of essentially the payment utility of this infrastructure. So we're seeing these metrics as well in our own payment network. We just said as of October 30th, Circle Payment Network, from the last time I reported, had grown 150 percent now to about$58 billion of annualized payment volume.

28:37That's a new international payment network that we've stood up. So volumes are growing. Liquidity is growing. Transactional utility is growing. And those are the hallmarks of an infrastructure that's coming of age. All right. Well, that was certainly the story of the quarter. Thank you, Jeremy. Really great to talk to you about all the big news in your world right now. Jeremy Adelaire, CEO of Circle. Coming up this morning, CVS announcing plans to split into two separate companies. We're going to discuss the implications with the top health care analyst as the stock is down this morning. Plus, chip stock sitting out the rally today as investors weigh how the midterms could impact the AI build-out, we'll discuss with an analyst next.

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29:46It's the holiday season at House of Burrell, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Shipping, billing, admin, payroll, marketing. You're managing all the things. So why waste time sending important documents the old-fashioned way?

30:25Mail and ship when you want, how you want with Stamps.com. Print postage on demand 24-7 and schedule pickups from your office or home. Save up to 90 % with automated rate shopping. That's why over 1 million small businesses trust Stamps.com. Go to Stamps.com and use code podcast to try Stamps.com risk-free for 60 days. Take a look at some gains this morning. Best day for the Dow in several months. S &P up over 100 points. VIX back below 18. Number of interesting wrinkles. Retail, for example, best week in almost a year. Home construction, best week since August. Com Com services up four, energy down three, a lot of wild swings post-midterm.

31:10Yeah, I guess the market taking it as some sort of clearing event, removing the uncertainty of prolonged, I don't know, disputed results or something like that, just having a definitive answer. And now it can move forward. That's certainly what we're seeing a little bit. But some of these tech trades coming back, like Apple, Microsoft, Amazon, helping the triple Qs. Time now for a news update. Pippa Stephens has it for us. Pippa. Hey, Sarah. Current House Majority Leader Steve Scalise and House Judiciary Chairman Jim Jordan say they will both run for minority leader in the House after Speaker Mike Johnson said this morning he would not run for the leadership position in the new Congress.

31:45The Republican caucus is scheduled to choose its new leader next week. New details in the probe of a Learjet crash in Florida Sunday that killed all nine people on board. NTSB investigators say a piece of the plane was found nearly four miles away from the crash, confirming earlier reports that the plane was breaking apart before impact. According to investigators, the piece found was from the part of the tail that controls the plane's pitch. And a huge ratings win for the WNBA. According to the league, Game 7 of the championship between Golden State and Atlanta was the most watched postseason game in league history, with 3.3 million viewers.

32:22It was also the most watched WNBA finals since 1999. The league says it also set records for attendance and merchandise sales. Carl? The story evolves. Yes, thanks, Pippa Stevens. Still to come this morning, two parts of the market that might see big impacts from the election results. We'll talk about this weakness in chips today as the AI buildout gets questioned and the changes that could come to health care policy under a Democratic Congress. We're at the very beginning of the adoption cycle where people are seeing where, you know, AI and superintelligence can really take us. And for that, you need all kinds of compute.

32:57You need CPUs, you need GPUs, you need all of these accelerators to come together. And this is what we specialize in. So we're very, very excited about the long term demand. That was AMD CEO Lisa Su earlier this morning discussing demand for her company's products. Shares of the chipmaker jumping on earnings, but are well off their best levels right now. As the broader chip space hits out the rally, names like Marvell, Micron, Intel getting hit the hardest here in the tech trade as the midterm results raise questions about the AI data center build out. Let's bring in Harsh Kumar, BMO, capital markets analyst.

33:31Harsh, do the midterm results change anything for you about the thesis on these names? So this is a little bit of a head scratcher, right? The midterm elections are pointing towards Dems taking over the Congress and the Senate. And clearly, you know, it brings into question some of the legislation around the rollout of the data center, particularly in places like Texas, Tennessee, Mississippi, et cetera. But I think overall, look, there is a need for the data centers. The technology that comes, the AI that comes from these data centers is very good for productivity. It's good business for these states ultimately.

34:08So I think it's a matter of working through the noise. And I think this will get sorted out as the states come through and see the business side of the things. This creates jobs. It's a tremendous amount of investment. But, yeah, we're taking a little bit of a hit, particularly in the AI trade just this morning related to the results from the term. So, I mean, can you make the leap that there will be less data center building activity or more regulation? And therefore, that will impact earnings of some of these companies after we just got, you know, AMD so bullish on on data on their data center business.

34:47So, look, I think the next one or two years are sort of chalked out, in our opinion. These data centers are multi-billion dollar investments on part of the hyperscalers. These typically take months and quarters of planning. So it's fair to say, I mean, many multiple companies have told us that basically, you know, these data centers are planned out three to four years, sometimes three years to four years in advance. And so I can say that 2027, part of 2028 is probably chalked out. Post-status regulation doesn't come through here in the U.S. You can always put inference outside the U.S. You can put it in Canada, Mexico, South America, whatever, you know, whatever legislation allows an ample power is available.

35:32I can see, you know, areas of the world like Saudi Arabia, which has been making a move towards the hyperscale centers, getting excited about this sort of a situation of adding more capacity. So I think this will just be have to be worked out. But I think ultimately the demand is there and the need is there for these data centers. Harsh, I know we're trying to look around big corners here. But if the if the build out and aggregate slows down, does memory respond? I mean, will PC shipments next year be less bad? I mean, I'm looking at Dell today. It's given up all of its gains since May. Yes. So, yes.

36:12Memory, we can specifically point to that. Look, HPM memory, the surface area that's taken up by HPM memory is three times larger than a typical DDR5 chip, you know, gig to gig. So my point is, yes, if somehow AI was to slow down next year, you will have more availability of regular memory. There's no question about that. And so therefore, prices will come down. PCs will be less bad, amongst other things. But we just don't we don't see that happening. You've had company after company. You've had Broadcom going out till 2028 or 29. You had Marvell going out till 2030. You had AMD yesterday talk about 2027 in entirety.

36:55NVIDIA has talked about 2027 in entirety. All these companies cannot be looking at a false set of data numbers. These guys are savvy guys. They talk to their customers and see the viability of the product that they're about to ship. So I think 27 is pretty much set. I think part of 28 is probably also set. And I think there may be room in that time frame to improve the legislative environment here in the U.S. and potentially even look outside the U.S. or in states that are more favorable to it. So do you like an AMD better than the memory chip makers at this point? Yes, we do like AMD a lot since the pullback.

37:33Look, the results yesterday were amazing. They are seeing incredible amount of strength, as Lisa just pointed out before me. The strength is coming from one area, which is AI, and that's broken down into servers and GPUs. And, you know, Lisa last night basically said that servers will grow 100 percent. If you can think about that sort of a magnitude of growth, 100 percent next year. That's just up from 70 percent three or four months ago. And the data center business, the GPU business will grow in excess of 100 percent. In totality, the company will grow around 80 percent. And this is with client or the PC business coming down about 25 percent in our model.

38:13So incredible numbers, very bullish for AI. I think this is just a lot of noise. We have to work through this, particularly given the election results. But I think I'm hopeful we'll work through it. Yeah, it's pretty amazing with data centers now reaching more than 80 percent of the top line. Harsh, thank you for joining us. Appreciate the take on AMD and the broader chip underperformance today. Harsh Kumar. Still ahead, we'll talk to a top analyst about how the midterms might impact health care policy moving forward. as we've got session highs, Microsoft all-time high now outperforming the S &P for the year.

38:49We're back in a minute. Welcome back. Stocks are higher as Democrats ride this blue wave this morning, taking control of both the House and the Senate for the first time since 2006. Health care taking part in that rally, but some questions remain about whether a Democratic Congress will enact any changes to health care policy. Let's bring in J.P. Morgan's head of health care services research, Lisa Gills, back at Post 9. Lisa, it's always a treat to have you. Thanks for joining us. So great to have you. to be back. Thank you. What's the most important thing going on in the wake of this? I think that what you're seeing right now is two things.

39:19So as we talked about last time, companies that are tied to Medicare Advantage, there's the anticipation that you could have some increased legislation around that. While those that are Medicaid, as well as the exchanges, there's some hope that perhaps you reverse work requirements or bring back the subsidies around the exchanges. Two things that potentially could happen, although, as we all know today, when we think about the Senate, while the Democrats have a majority, they don't have a supermajority to override a veto. So the question is, can they actually get something done? JOHN YANG, Ph.D.: Implications for pharma?

39:55DR. JANE FERGUSON, Ph.D.: I don't cover pharma directly, but cover the drug distributors related to pharma. I think there are some questions around IRA and IRA pricing. Do they try to deepen IRA pricing, codify IRA pricing going forward. So I think those are some things that we'll keep an eye on. As you think about IRA pricing, the impact that it'll have potentially on physician practices, utilization patterns. So today, the way that a physician practice is reimbursed is the average sale price plus six. If you go to an IRA price, well, that might be better for the individual. That could be worse for the practice.

40:29So, you know, there's things that you can move around that, For example, like Globe, which would take the reimbursement and put it around the channel. What are the expectations of the insurers that you cover? Yeah, so I think for the insurers that we cover, so let's just go through them. In all honesty, there's kind of two camps, as we've talked about before, right? Those in Medicare Advantage. And I think you see that today, Humana off a little bit, United off a little bit because of this concern of could we see increased legislation? Could we see increased changes around Medicare Advantage? On the positive side, you see names like Centene and Molina and Elevance that are much more tied to Medicaid trading higher today.

41:07Traditionally, it is considered, you know, the Democrats are more favorable to Medicaid than Republicans. Well, yeah, they railed against, I mean, President Trump cutting benefits. Absolutely. They did. And also, if you go back, I mean, obviously, Obamacare is the ACA. So could they do something to try to fortify or, you know, strengthen the ADA? Could they do that without the president? I think it's going to be difficult to do anything, to be honest with you. I think we're kind of stuck in gridlock here in the next couple of years. I think the last time I was here, I said one of the most important things we're going to watch is who wins.

41:41And if it's the Democrats, what kind of Democrats win? Because that sets things up for 2028. I think you mentioned earlier 2006 was the last time we saw a sweep like this. And in 2006 is when things were set up for Obama. Right. So do you have any early calls on 28 as it relates to where the party is on these health care issues? You know, I think that we've heard many of the party participants talk about a more nationalized health care program. As everybody remembers, when Obama tried to do that back in 2008 time frame, we had the Affordable Care Act that passed. Right. So I think it's very difficult to see something pass from that perspective.

42:23But could they come back and strengthen the overall exchanges on a go forward basis? Absolutely. I mean, I think that's something that we'll keep an eye on. With that said, as we wrote in our note today, our concern would be around the rhetoric. Right. Even though if nothing ever passes, depending on the candidate, if they're out there and they're screaming for Medicare for all and screaming for prices to come down, that's not generally good for stock performance. XLV on a one year. I mean, you can see. I wonder just more broadly if the sector continues to benefit from people asking questions about tech, being less certain about other big momentum traits.

43:00Right. Does that make sense? A hundred percent. I mean, I think if you look at this, health care does well on days that tech does not. Health care does well on days that people are looking for flight to safety versus growth, even though, you know, you could argue that there is still growth within health care. But it's a much smaller component of the S &P today than it was a couple of years ago, right? It's less than 8 % of the S &P today versus 14 % a couple of years ago because of the growth in tech. CVS is not helping. Do you cover that one? I do cover CVS. Why do you think the market is so negative on this pharmacy fence?

43:32I really welcome the opportunity to talk about this. So I have covered Caremark since 2002. Two, I covered CVS when they came together with, or covered Caremark when they came together with CVS 20 years ago. And so what I would say is a couple of things. One, people are like, why are you doing this now? You say you're coming from an area of strength. I really think there's a couple of things here. One, if I was sitting here and they were doing it and not coming from an area of strength, you'd be like, oh my God, they have to do this. They're getting out of the business, right? So one, they're coming from a strength.

44:02And I think the strength is coming from the fact that we now have a cost plus model. CVS is the largest player in the marketplace. They've got over 28 % market share. I think on a go-forward basis, continuing to be more independent. If you look at a lot of the legislation that's really driven by the independent pharmacies more than anyone else, this is going to put them more on equal footing between independent pharmacies and CVS instead of being owned by a large organization. So I think that makes sense. Secondly, when you think about the assets that stay, think about UnitedHealthcare. Think about Elevance and think about, you know, what those assets are.

44:39And they're very similar. We're talking about CBS Today trading now at less than 10 times. You've got, you know, United trading at 17 times, Elevance at 14 times. I think this is going to prove to be an incredible opportunity in the long run for investors from that perspective. Stay close. There's so many moving pieces. Lisa, thank you so much. Thank you. Thanks for having me. S &P is near. Session highs. We're all over it. Once a walk on the street comes right back. Welcome back. shares of FanDuel parent Flutter higher despite quarterly results. Missing estimates. Contessa Brewer joins us now after speaking with the new CEO in a first on CNBC interview.

45:13Contessa. Well, Sarah, Flutter disappointed the street on all kinds of metrics here. Earnings, revenue, EBITDA. So why is the stock up? New leadership. A change in power in Congress and at the state level could indicate a huge opportunity for sports betting, limiting prediction markets and what they can offer on sports. There's also new leadership at Flutter itself. CEO Dan Taylor joined me right after the earnings call this morning for our first on CNBC interview. And I asked him what these midterm results mean for FanDuel. We need to set ourselves up to win whatever the political cycle we're on.

45:48I've been watching the midterms tend to be like everybody else in America and around the world. And we're excited about opening up new states to sports betting and gaming. Just to remind us, half of America is still without regulated sports betting. 90 % of America is still without regulated online gaming. That's a big prize to play for over the long term. You can see the whole interview on CNBC.com. In the short term, FanDuel is spending more on promotions to win customers. And it worked. Average monthly players in the U.S. rose 12 % over the last year. It's also spending big to win its predictions business.

46:28But the cost of sales here costly, 58 percent, with Taylor pointing out how competitive the environment is. FanDuel's trading volume on its predictions platform tripled from July. The company has paused buybacks and cut its full year outlook. Taylor says over the next two years, he's really focused on reducing debt. Side note here, DraftKings shares right now are up eight and a half percent. So way outstripping what Flutter's doing. In a pretty active tape, Contessa, thank you. Speaking of which, 7710 essentially fills the gap from last Thursday. Remember before the flush that began on Friday?

47:04I mean, as Santoli said, the positioning coming in matters. People were, I mean, the tech trade, it was kind of bearish lately. There were concerns about higher financing costs. And there's still concerns now about data center construction weighing on the chips. But everybody else seems to be really liking the certainty. Yes. The rally, also lower oil prices. Yes. And if this was a rebuke of the war and high gas prices, maybe that's being reflected too. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium.

47:39You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules.

48:10Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number 3. There is no dress code, but always leave them talking. Number 2. Show off different outfits. No party remains unattended. And rule number 1. Have it all without spending it all. Happy holidays from House of Burl, Burlington.