AI Data Center Risks, Fed Rate Hikes & Energy Plays

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0:39and 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. You're listening to The Exchange. Here's today's show.

1:02And welcome to The Exchange, everybody. I am Brian in for Kelly today. The tech trade is not dead. Long live the tech trade. The Nasdaq soaring on this Veterans Day. We are up over 2.5%. Chips and the memory trade rallying. And listen to this. With the move today, shares of AMD now 22 % in just three days. It is benefiting from the sudden chaos around NVIDIA. That stock is a little bit higher today. But Jensen Wong's future as head of the company, Cloudy, after an affair with a customer and an alleged spy for China. One big reason for the pop today, CoreWeave, the beaten up stock, beating the street and busting out to a big move higher.

1:41CEO not mentioning NVIDIA's Jensen Wong on the earnings call, but CNBC did ask about Wong and his importance to NVIDIA around CoreWeave today. NVIDIA is an extraordinary company, right? It is not one person. It is an extraordinary company. There are thousands of people over there that interface with thousands of people at my company every day. They they integrate on the technology. They integrate on the physical infrastructure. They integrate on the networking. We have a close relationship with them up and down the companies. And they are a great partner. They have been a great partner for us for years.

2:24They will continue to be a great partner for us. Now, more important for the sector on a macro perspective, maybe, is that the CEO of CoreWeave, Mike Lynn Trader, also said that demand overall is strong and that it is 10 times oversubscribed to what capacity they have left through this year and into 2028. All of that helping calm AI jitters a bit today. But your first guest on the exchange says real answers about the AI trade will come next week with Anthropics IPO. Dan Niles, founder and portfolio manager at Niles Investment Management, and joins us now, Dan. Welcome. Good to see you. A lot to get through.

3:01CoreWeave today kind of making everybody feel a little more comfortable, although I will say it is Veterans Day. Bond market is closed. Thank you to all the veterans, by the way. What do you take away from CoreWeave's numbers and the market reaction right now? Well, here's the thing, Brian. Even if you're in the most vicious bear markets, you end up with amazing rallies. So let's assume June of this year was March of 2000. From March of 2000 to October of 2002, the bottom, you have the NASDAQ go down 78%. Within that, though, you had seven rallies of 25 % each. Seven rallies, 25 % each. So in the short term, you can end up with these vicious countertrend rallies when you're still in a bear market.

3:54Do you think we are in a bear market, Dan? I don't know. Honestly, for the way I invest, I don't really care because I view it as stocks will get oversold. You want to get out of the way, play for a rally. I don't think we've seen the top, but given what happened during the midterms and the regulatory friction showing up there, plus some of the fundamental data points that we're seeing. Right. Why did SoftBank cancel a bunch of turbines with G. Vernova demand so amazing? They would argue that they bought too much ahead. And I don't want to speak for SoftBank and Masayoshi Son, the CEO. No, but they would argue, and I looked at the write down that they maybe bought ahead of time.

4:38Maybe they bought too many. I don't know. Do we read that as a net negative? But that's the point. Yeah, of course, that's a net negative because all of these companies have been overbuilding all at the same time. And so when you get signs of companies that said, oh, my God, you know, the biggest problem is we have more demand than we have supply. We can't get access to power. Well, if that's all true, why don't you just take the turbines and resell them in the aftermarket if demand's so strong, right? Yeah, but I would argue, Dan, and by the way, this is the topic of my newsletter, which should be out tomorrow, which is that we've overordered on data centers anyway.

5:14All these data centers were never, ever going to be built. Forget about the election. It's, you know, maybe it'll have some effect. Maybe it won't. But we overordered. And so it's natural now to see some of these companies start to pull back, yes or no. Well, if you're starting to pull back, then you've got an issue because now you're dealing with the other side of this. And in fact, it is March of 2000. For me, it doesn't really make a difference, not with the way I think about investing, because I go, you're not going to know except in hindsight. I don't think it's the top for one simple reason.

5:52Agentic AI is very, very new, right? You had OpenClaw get formalized in January. You had MetaMuse come out in September, which I call, you know, Agentic for the rest of us, right? Because OpenClaw is tough to do, right? You had to get a Mac. You had to set it all up. Muse is really easy to use. Having said that, when you see things like that GE Vernova news, or you hear supposedly Anthropic on their roadshow saying, hey, we plan on canceling our SpaceX contract, by middle of next year. You've gone from demand is insatiable, we can't get enough compute, to no, we have enough compute, we have enough power.

6:33And so you go, hmm, well, I really need to think about that. Well, we shouldn't be, listen, to be fair, and I don't disagree with you, Dan, because we've been talking about this for a while, but this should not be new because we have been talking about this for a while. This idea that we've overbuilt, This is not some new thing that suddenly popped up last week around the election, is it? I mean, this is nobody ever expected 400 gigawatts, gigawatts, which is basically like New York City uses 10 gigawatts on a super heavy day. So just do the math there. Nobody expected all of that to be built all at the same time.

7:13I don't know why the market is suddenly real. Oh, my goodness. This wasn't going to get built. This shouldn't be new to anybody. Brian, when's the last time we had companies canceling orders for anything related to AI infrastructure? Well, to be fair, there was something in Wyoming. I get your broader point. Not to the level, I can't come out and say which ones now, but maybe not to the level of SoftBank and GE Vernova, I would agree. Yeah, that's the point, right? Because if you go back to 2000, that's when you started to see things. Well, it's a sequence. This is why, don't forget, I've been negative since early October.

7:50You can go back and read my stuff. I'm like, at the point that Texas is coming out and saying, first, we're not doing new interconnections to the grid. And they come out a month after that in September and say, we're not giving out environmental permits. And then you know that there's a blue wave coming. The time to get negative was back in October. Yeah, fair. But you didn't get any company coming out and saying, hey, we've got cancellations of our orders. This is the first time you've gotten physical proof that guys are coming out and canceling things that they were ordering. You have not seen that since the end of 2020.

8:30You just inadvertently or is it vertently? I don't know what the actual inversion of invertently is. You just dropped knowledge, which is why we have you on, Dan, that I tweeted out actually about an hour ago, which is a lot of people don't realize this. The current governor of Texas, the Republican, Greg Abbott, right, who I've met and is a nice gentleman. He actually very quietly about six to seven weeks ago basically stopped or delayed permitting on new data centers. So the incoming governor can say what she wants. But the reality is Texas right now. And I sent out the link. It's basically at the top of their permitting website that there already is a semi moratorium on new permitting in Texas.

9:14So to your point, if smart people like you and others saw that about seven weeks ago, they might have realized this is not just a reflection of the election. No, it is a reflection, because the reason Greg Abbott did that is what is a number what is a politician's number one goal? To get reelected. At the point, his constituency is saying, you know, we don't like data centers and you can't blame people. Right. When you've got companies out there saying it's going to put 50 percent of the population white collar workers out of work in the next one to five years. And there's a 10 percent chance it's going to kill kill humanity.

9:52Of course, people are going to vote against them. That's why he did it. The thought was that he's going to get reelected and then. We go back, right. And things are going to go back to normal. That's not what happened. And it didn't happen in a bunch of states. Right. It's not just there. It's Michigan. It's Ohio, Georgia, Georgia. You know, fair enough. I was just at a conference on Monday in Arizona. We're going to go in a second. And I had the CEO of Entergy, which is the Louisiana based power company, say that they're already getting calls. If there's anything in Texas that happens, Louisiana, Arkansas and Oklahoma, which they do not operate in.

10:32But I know for a fact that Oklahoma has been making calls. They're happy to take the data center. So if it doesn't happen in Texas, maybe it's going to happen in Louisiana, Arkansas, or Oklahoma, because they have the gas, they have the power, they have the transmission lines, and they have the will, and they want the tax revenue. Yeah, I mean, the bigger thing here, which we haven't gone to, has gone down this sideline, is what's actually going on with revenues and operating profits. And in that regard, Anthropic is interesting because revenues were growing sequentially at 140%, 7 % in Q2. That went down to about 144 % in Q2, went down to 47 % in Q3.

11:11That's looking like it's tracking to 25 % growth in Q4. And by the way, if you add both Anthropik and OpenAI together, the losses have actually gone up from Q2 to Q3. So it comes down to, can you pay for this stuff? And what is going on at the end customer level? Bottom line is this. I think you and I both agree stocks are going to rally from here. is probably led by the AI trade because if they can rally 25 % seven times during a 78 % drawdown, right, there's no reason to think this is going to be any different. Then you're going to get to earnings come January, and we're going to find out what two months of regulatory uncertainty, because the new governors don't get sworn in until the middle of January.

11:55That's right. These companies all have to guide for the March quarter. Some may guide for the full year, if they're dumb enough to try to do that. And you're going to then find out what the impact of all of this is. Well, let's hope they are dumb enough to do it, Dan. We're going to say goodbye. We've got gains across the board today. It is Veterans Day. So the bond market is closed. Take that from you, Will. And by the way, I think rabbit hole was the right thing to say because we've taken both the red pill and the blue pill. Dan Niles, appreciate it. Thank you. All right. Let's turn now to our other big story.

12:29And that is the rather shifting Fed narrative follows that hot and inspected inflation reading in an interview with PBS. Chicago Federal Reserve President Austin Goolsbee calling the inflation report, quote, borderline disturbing. His comment echoes Fed Governor Chris Waller warning of a possible half percentage point rate hike at their next meeting on December 9th. And none other than the team at Goldman Sachs now forecasting two more rate hikes from here. And here's how the macro market sees it. Another quarter point rate hike and now essentially a lock at that December 9th meeting. And your next guest says the flurry of news just shows maybe how lost the Fed is right now.

13:10Joining us on set, Michael Darda, chief economist and macro strategist at Roth Capital Partners. Don't worry, Michael, we're not going to talk about data center spending, but it kind of does go to that inflation report. Do you agree with Goolsbee that it was a little bit, in his words, disturbing? I do agree. It was not a good inflation report, but I'm a bit confused about the Fed's reaction function. I would like them to explain why they took a flyer on the October meeting when we've basically been in a boom for macro data essentially all year, starting in the second quarter. And the Fed has these tracking estimates available to it.

13:51They decided to pause the rate hikes. A day later, we get a blockbuster GDP report. And the numbers for Q4 are tracking nominal growth into the sevens. You know, this is we had a two year period, 24 and 25, where nominal growth was just above 5 percent. It looked like the Fed had successfully soft landed the economy. I think in that context, you do want to overlook or look through supply shocks. But nominal growth is robust to supply shocks. It sends real growth and inflation in opposite directions. So if you get a big jump up in nominal activity, that should tell the Fed they're off sides. And I'm a little nervous here about this situation.

14:36Wall Street ultimately is a trust business. You trust people. You trust institutions. You trust trading desks. You trust CEOs. You trust, trust, trust. Does the bond market overall trust the Federal Reserve? It sure does. And it's actually shocking. Now, we've had a big move up in bond yields this year with a growth acceleration, but it's all real rates. Inflation expectations have been dead steady. And so the bond market is giving the Fed a lot of leeway. Too much leeway? I don't think that the Fed should take it for granted. And this boom condition needs to be met with tighter monetary policy.

15:18In other words, sorry to interrupt, in Michael Darder's view, the Federal Reserve has to raise rates December 9th. It must. Yes. And at a very minimum, the 75 basis points of insurance cuts that they did last year, that should already be gone based on the data that we have today. So I do think that the December meeting merits a move, potentially more than 25 basis points. Chris Waller yesterday was talking about 50, even though he voted to not hike rates in October, which is a bit strange. But yeah, I think they're a bit offsides. So would you do 50 or 25 basis points? I would do 50 and then communicate that the macro data justifies removing those insurance cuts from last year.

16:02And then hopefully the Fed can move slower from there. But they really I think if they're serious about getting back to price stability, 67 months of above target inflation. And then if the Fed takes your advice, let's say they raise a half a percentage point December 9th. Do bond yields fall? Well, which sounds weird. I know because you're like, well, they're raising. Why would they fall? Because it goes that trust issue that you and I were just talking about. Yeah, I really think it would depend on how the Fed is communicating. Obviously, they're not going to do a lot of forward guidance. If the market starts to expect nominal growth, top-line growth to really falter, then you could see bond yields falling.

16:42I don't think there's much room for them to fall in this environment. So even if they did do 50 in December, I'm not sure that I would make a big bet there just yet. But down the line, I mean, one risk we have is if the Fed is going to be reacting to simply realized inflation prints, that kind of sets us up for, you remember Milton Friedman's commentary on the fool in the shower? You turn it on, it's too cold. You jack the heat up. And then there's a lag. There's a delay. Before you get burned. Before you get burned. So doing too little this year sets the Fed up to play catch up. And then they could have a situation where they end up overreacting at some point next year.

17:23And the economy will pay the price and will have more volatility and risk markets. So hopefully that can be avoided. It's making me a little bit nervous. Well, if it's making you nervous, it should make us all nervous. Michael Darda, Roth Capital Partners. Michael, appreciate you coming on the program. Good to see you. Thank you. All right, folks, I want to draw your attention to shares of Meta. We just talked sort of about them with Dan Niles. Taking a bit of a dip after United Airlines announced it is restricting access for third-party AI agents, not just directly on its own digital platforms, but also indirectly via travel agencies and price aggregators.

17:58United Airlines citing concerns about security breaches, account changes and unintended purchases. Why are we flying to Barranquilla, Colombia? Anyway, as well as the fact that automated AI actions could potentially violate FAA and DOT regulations, which sometimes require human acknowledgement. You know, the whole it's illegal type thing. Anyway, on deck. What we have learned about the NVIDIA affair and alleged spying scandal. Plus, despite the anti-data set of rhetoric, your next guest still believes in the buildout, and he's buying power and electric stocks, including that name. Who is it? It's a mystery.

18:39That's why it's called the Mystery Chart. The Exchange. Back after this. This is The Exchange on CNBC.

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19:22Oh, look. You just got added to a meeting about coordinating another meeting to prepare for the pre-meeting ahead of the follow-up meeting, which will, of course, require a recap meeting. And then another meeting. Hit your booking point, book with Southwest, and enter airplane mode. 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.

20:09Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.

20:21Welcome back to the exchange and a little bit of good news today for all you NVIDIA investors out there. The stock is up right now to stop falling, at least for today. We'll see what happens in coming days. But NVIDIA is already coming off its worst five-day stretch in more than four years. And even with today's pop, it's up about 5%. NVIDIA is still down about 6 % since Monday. And here's kind of a nasty RBI. NVIDIA is trying to avoid a six straight week of losses. If it loses steam this week, it's down six weeks in a row. That would be NVIDIA's longest losing streak in 14 years. Now, obviously, there's still a lot of questions around the ongoing investigation into Jensen Wong's affair with an alleged Chinese spy.

21:08And while, listen, his private life is his own private life. But the public nature of this and the importance of NVIDIA as a company and as a stock and as an investment, maybe your money certainly merits more coverage. And we have you fully covered. Megan Cassell is in Washington with what the administration knew and when they knew it. Yunusun is in Beijing with how the scandal is playing out there. And Robert Frank is here looking at the unique ownership structure that in some ways protects Jensen Wong's NVIDIA stock. But let us start in D.C. because Megan Casella does feel like every day we learn something that maybe the White House may or may not have known something a while ago.

21:52Every day or maybe even every hour, Brian, we're learning something new on this story. But that is the biggest question in Washington right now. It's who knew what about NVIDIA and Megaspeed and when did they know it? So Axios is reporting a new piece of that story this morning. They say Commerce Secretary Howard Lutnick received a memo back in May warning about Jensen Huang's relationship with an alleged spy. That was before President Trump's trip to China. They also report that Treasury Secretary Scott Besson confronted Lutnick just last week about Megaspeed, the company and the NVIDIA customer where the alleged spy worked.

22:24Besson reportedly asked Lutnick why Megaspeed was not on the Commerce Department's blacklist. to which Lutnick replied he would look into it. So clearly, Brian, the Commerce Department and its handling of export controls increasingly in focus here. Some lawmakers are already calling for Lutnick to testify on the Hill, as well as Jensen Huang. And now we're starting to hear calls even among some elected Republicans for Huang not only to testify, but to resign. North Dakota Republican Kevin Cramer told CNBC earlier today that he can't believe we're even considering him not resigning. He also said Huang has been arrogant and dismissive in meetings with lawmakers about the potential national security risks of sending China the latest chips.

23:04So Hill Republicans have given Huang until the end of the day today to respond to their request for a closed door briefing next week. And if he doesn't respond, they say, Brian, that they're prepared to issue a subpoena. Is this like bipartisan rage then? And we finally found something, Megan, that maybe D.C. can actually all agree on around this NVIDIA thing? Or is this is this partisan? It's it's increasingly bipartisan. There's still a lot more to come from Republicans. I saw Senator John Thune talking about this, not wanting to make much commitment on this. So there are some cracks, though, emerging on Capitol Hill.

23:37One of the things that Kramer was saying in his interview with CNBC was that he was surprised there wasn't more outrage from Republicans yet. He felt like he was saying the quiet part out loud for the party. He seemed to suggest the party might have been distracted with things like leadership elections this week and that there will be more to come from others in the party. But when it comes to those lawmakers asking for the closed door briefing and prepared to issue the subpoena, those are Republicans as well. So I definitely think we're going to see something of a groundswell start to emerge.

24:05The White House, though, of course, for now, still standing by Jensen Huang, the president saying earlier this week, he believes he should keep running the company. All right. Megan Gusella, NBC. Megan, thank you very much. All right. Now let's turn to part two, and that is Eunice Yun in Beijing with how this saga is playing out in China. So Eunice, what are, it's got to be a very different story over there, I would imagine. Yeah, it is. There are some more details emerging about who Alice Wong is. So Alice Wong spent the better part of a decade working at a Shanghai-based private equity firm that was founded by a veteran investor who has run into trouble with the Chinese regulators.

24:46According to local media reports, she and he both presented themselves as both business as well as romantic partners. She ended up at Megaspeed, which is the Singapore data center spinoff that was linked to a Chinese company. And that's essentially where people expected that she had met with Jensen Wong. Now, the way that she is being presented or that the way she's being seen, I should say, here publicly in China is as what people call a tianke. So this is a commercial fixer. It's somebody who's an opportunist, who seeks money-making opportunities, and then uses their contacts and tries to leverage those contacts.

25:31So a person like that would really see that connection with Jensen Wang as very, very beneficial. And in fact, that's how people here are explaining why she would be so public about her contact with him. NVIDIA chip traders have also told me that the demand for NVIDIA chips here is just so huge that she would be seen as marketing her access to the company and those chips. Yeah, and I do remember last year, we were reporting on stories about how Singapore was used as kind of a conduit to maybe get NVIDIA chips in the countries. And I would imagine that some people are using the fact that she was pretty public.

26:12I mean, the photos are all coming out that maybe they'll say, well, that proves, you know, she was not a spy. She was too public. Yeah. And that's that's the reasoning of a lot of people here. I mean, the NVIDIA chip traders have said that this trade has is just so sensitive that there is another possibility that the Ministry of State Security is very closely monitoring this trade. So if it is true that she was working to try to sell access of NVIDIA chips to Chinese companies, that she could have been approached, even though she would be seen as doing something that's positive for the country, that she could have been approached by the MSS.

26:57So the MSS, it's not uncommon for them to approach Chinese nationals for what's described as tea. So you come in for tea, you have a little conversation, a lot of information. And so because of that, within Chinese business circles here, people are saying, well, you know, she might not have been a spy, as in like a spy in a novel. I mean, she could have been spying, but she might not have been a professionally trained agent. There's so many layers to unpack, but Yunus Yun, we're going to let you go to bed. We know it's like early in the morning there. Unisun, thank you very much. Appreciate that.

27:32Or very late at night. Well, Jensen Wong is by far NVIDIA's largest individual stockholder. He owns about a 3.5 % stake. And when the company's worth$4 trillion, that's a lot of money. But the ownership structure protecting most of those shares is very unique from other billionaire tech founders. Let's find out why. Robert Frank is here with more. Why is it different, Robert? Well, Brian, let's walk through exactly who owns these shares and how they're owned. because Jensen Wong has seen his net worth decline by over$50 billion in the past month with his net worth now about$140 billion, maybe a little bit higher today based on where that stock price will close.

28:07And most of his NVIDIA shares are actually co-owned with his wife, Lori. Now, according to SEC filings, about 800 million shares, in fact, are held by trusts where both Jensen and Lori Wong are equal trustees. Now, for most of these trusts, they have equal votes and they have equal rights to sell. Their main trust, known as a revocable or marital trust, holds about 530 million shares. Then you have two irrevocable trusts. They hold about 140 million shares. And then you have these LLCs that hold an additional$135 million. So that's where you get the whole number. Jensen Wong directly holds only about 70 million shares worth about$12 billion.

28:46Now, trust and estates attorneys tell me that while it's common for tech founders to hold their equity in a trust, it is far less common to hold almost all the shares jointly with a spouse. Now, the irrevocable trust could also complicate any division of the shares, since it's the trust, not the individuals who own the shares. The bottom line, Jensen Wong has very limited economic control over NVIDIA with just 3.6 % ownership and even less control since those shares are held in trust with his wife. Now, for the full story on this complex web of trust and what it means for NVIDIA shareholders. Sign up for the Inside Wealth newsletter at cnbc.com slash inside.

29:25So even if he is pushed out of this company, which it seems there's a good chance he will. But we don't know. But it's not a zero percent chance. Yes, that's right. He can't be forced to sell any of that stock. No. And more importantly, let's say we don't know what's going to happen with the marriage. I mean, lots of headlines speculating, but we can't say. And there's a good chance that. Exactly. Exactly. But even the fear is if there's a divorce and typically, like I said, say an Amazon situation where Jet Bezos had to give her shares and then she sold some of those shares, a lot of those shares.

29:58That won't happen here because she already owns the shares. So lots of people speculating, what could Lori Wong get? She already owns half the company through these trusts. So and the trusts, in many cases, are the owners. So she can't sell them and he can't sell them. So this is a very stabilizing factor for NVIDIA shareholders, whether he stays and whatever happens with their marriage. I read somewhere, and this is probably better for Eunice, that Alice Wong, the alleged, the affair of alleged spy, Wong's not even her last name. It was Lei, L-E-I, and maybe it was changed. There's so many things to unpack here.

30:34I wonder when they change it. Well, if it was, again, there's a lot of stuff that's floating around. Yeah. But it was interesting to find out through the SEC filings that Lori Wong, that many people are now saying, what will she get? She's already owns half of these shares with them in these trusts. So that was interesting. We'll see what happens. Robert Frank on the uniquely CNBC side to the story. We'll sign up for your newsletter, Robert. Thank you very much. All right. Coming up, putting the AI in Main Street. Anthropics says that you, the retail investor, can get up to 20 percent of the IPO.

31:06I mean, not all at once. That'd be very expensive. But here's the big question. Do you, Mr. or Mrs. Retail Investor, even want it? We'll talk about it next.

31:23With the Discovered Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details.

31:52Oh, look. You just got added to a meeting. About coordinating another meeting. To prepare for the pre-meeting. Ahead of the follow-up meeting. which will, of course, require a recap meeting. And then another meeting. Hit your booking point, book with Southwest, and enter airplane mode. Hey Fidelity, can I get a second opinion on stocks in the Fidelity app? With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then? When you're ready, trade U.S. stocks and ETFs with no commissions. That's right. I am always right. Investing involves risk, including risk of loss.

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33:03Welcome back to The Exchange. I am Frank Collin with your CNBC News update. It seems that Elon Musk isn't quite ready to say goodbye to the cyber truck after announcing last week that production would end by the middle of next year to make room for cyber cabs. Musk wrote on X today that production will continue through next summer to work through its order backlog. Musk wrote that it's not the smartest move for maximizing profit, but says there must be, quote, room in the world for sentimentality or what's the point? Russia's ambassador to the U.S. has passed away. According to the Russian Foreign Ministry, 66-year-old Alexander Darchev passed away suddenly, and the cause of death has yet to be determined.

33:39Vladimir Putin appointed him to that post in March of last year. ESPN NFL analyst and former New York Jets head coach Rex Ryan surrendering to Nashville police today for allegedly hitting two pedestrians in a crosswalk with his truck. According to police, Ryan allegedly ran over two of the victim's feet before driving off. He faces six charges, including leading the scene of an accident. His bond was set at$6 ,000, and the exchange is back right after this.

34:07All right, welcome back to the exchange. Kelly will be back on Friday. Stocks are higher across the board today, and your next guest says the volatility that you have seen lately should be a longer-term buying opportunity, and rather than the beginning of the end, he is sticking with the hyperscalers. Joining us now is Chris Crisanti, Chief Market Strategist at MAI Capital Management. At the beginning of the show, we had Dan Niles on. He was arguing that maybe there's, I don't want to speak for him, sort of a bubble-ish and that some of these data centers may not get built. I would agree with that.

34:39I don't think all of them were ever going to be built anyway. Right. But the ones that are on the books, you are convinced that they will get built. Oh, absolutely. And even the ones that aren't yet on the books are going to get built. And here's my reasoning, which is if you do the railroad analogy, which we're kind of sick of, but you do that, you know, the governors aren't going to say, no railroads in my state. What they're going to say is, hey, if you're going to come in, you've got to do these three hurdles. And the data center math is such that they can afford to do that. They'll give up maybe 100, 150 basis points of returns on the data centers.

35:13They've got 12, 15 % returns on those things. So they can afford to do it. They can afford to give out electricity. They can afford to solve water problems and job problems. So the solution is coming. And so if they're going to be built, that has terrific ramifications for your investment. Yeah. And I don't want to like, you know, talk my own book, but my newsletters should be coming out tomorrow. And this is the topic because energy AI is an energy story in disguise. Number one, the Texas governor has very little power over data centers anyway. It's mostly a state regulatory issue. Number two, if the data centers are not done in Texas, they're going to be built in Louisiana.

35:48They're going to be built in Arkansas. They're going to be built in Oklahoma. For a moment, I know that the CEOs and governors have already been on the phones talking about it. So with that said. And I would give some credit to the Democratic governors that were just elected. OK. Because they're from Kansas. They're from Texas. I'm sorry. They're from Iowa. They're from Texas. Ohio. So they are not going to want to shoot themselves on the foot on day one. Most of these jobs are trucking electrician HVAC. They're not tech bros. They're going to say, we don't hate data centers. We just want them to be good neighbors.

36:19And then they're going to lay out a set of requirements to be a good neighbor. And then we go from there. Yeah, and it's going to happen. And so we go to our mystery chart. See what I did there? I like it. Which was GE Vernova. Now, that stock's been, it was a huge winner from AI and data centers. Right. It's down 35 % from its highs, but you're a buyer. I am a buyer. And here's the interesting thing, Brian, which is I'm moving from the picks and shovels, which may or may not be vulnerable. Nobody has the perfect crystal ball to the power play. And the power play is a much longer cycle play. Sooner or later, AI spending will peak and roll over a little bit next year, three years from now.

36:57But the power play will last five to 10 years. We simply don't have enough, not just for AI, but for so many other things. We're rebuilding the grid. We have the capital. And so, gee, Vernova, I can see earnings progressions out five to 10 years. Because this is a really important point. There will be a point. And maybe it's now. I have no idea that we reach peak data center. Right. Not because of elections, because you're like, well, we have all the data centers we need. Right. To run whatever we need to run. Where that point is, I don't know. But it sounds like even when we hit that point, even if that point is right now.

37:33Right. You still like a GEV because of all the other things you just mentioned. And I'm guessing the international opportunity, which we never talk about. Right. Is a part of that story as well. Absolutely. And by the way, peak data center doesn't mean we've built 100 and we won't build anymore. It means it will slow. That's all. And so if we go from spending$2 trillion to$1 trillion, that's still a ton of money, still a ton of data centers. But NVIDIA's earnings will go down in that scenario. But GE Vernova's will not. GE Vernova, the pick. Chris Grisanti, MAI Capital Manager. Chris, always love having you on.

38:07Thanks, Brian. It's good to be with you. Thank you very much. All right. Coming up, folks. From a markets perspective, you saw tech back in the driver's seat, at least for one day. But will the recent volatility and ongoing concerns about what we just talked about, the AI build-out, keep you, the retail investor, on the sideline when Anthropic goes public?

38:31All right, very good news for drivers, maybe not great news for oil investors. Listen to this, the national average for gasoline falling to$3.94. Now that's still higher than it was, But we just posted the largest one-day drop in 18 years. That is the price of oil has come down. So as the price of oil has come down, what does it mean for oil stocks? Well, your next guest, turning defensive on oil a bit, downgrading three major producers, but recommending what he calls the gassy E &Ps. Joining us now is Bob Brackett, senior research analyst at Bernstein. Was I right, Bob? Is this your first CNBC appearance?

39:13It is not, but I've got a face built for podcasts, so I tend to prefer that long-form media. But good to be with you, Brian. Well, we're going to give you the four minutes you deserve right here, Bob. Let's knock it out. All right, so Conoco, Diamondback, Devin, you are downgrading. You don't hate them, but you think the money's been made. That's right. Most of the money has been made. These are pro-cyclical oil-linked equities. Oil started the year near 60. It doubled to 120. pulled back to about 90. But if you really think that next move is down, these are still great businesses. They have fantastic returns at these prices.

39:51But as equities, people tend to trim equities when that underlying commodity starts to fall. Yeah, and that doesn't mean that you're negative. And you're not even negative necessarily on these names. You've got market performs. But you believe a good place then if people sell those, put some of the proceeds into ExxonMobil. How come? Well, think about it as a barbell, right? So if you're going to kind of hide from oil for a while, what are the other two commodities that matter in my space? It's U.S. natural gas, and it's those refined products. And so if you think about ExxonMobil in that short term, we're still in a world where crack spreads, right?

40:28The value of refining relative to that underlying oil, crack spreads are half the price of oil. That is ahistoric, extremely high. Normally in the old days, maybe that's 10 to 30 percent. We still have issues around flowing barrels across the world. We still have asymmetric attacks from Houthi drones, Ukrainian attacks on Russian refineries. There's lots of little things that are harming the ability to get refined product to the consumer. And in the meantime, ExxonMobil can be out there and doing their darndest to get as many of those barrels at these prices to those consumers. So are we looking, I don't want to use the word safety trade because these stocks have been red hot, but given there's so little visibility, I mean, we really, Bob, we don't know what's going to happen day by day or even hour by hour.

41:16Is ExxonMobil a relatively safe play or is that the wrong word to use? I would say relatively safe and certainly within its universe of oil and gas companies. Think of it two ways. One, ExxonMobil's balance sheet is bulletproof. It's very large cap. The other thing that's unique about ExxonMobil is because of the closure of the Straits of Hormuz, a significant number of their volumes, especially their Qatari LNG gas volumes, have been trapped. So when the Straits reopen, yeah, maybe price comes down for them. But at the same time, you're going to see a lifting up in volume. And so that volume can help counteract price.

41:52And so maybe revenue doesn't fall as fast as others. Hence, yeah, defensive. Yeah, and also a name that we rarely talk about. It was created from the merger of a couple of companies. Expand Energy. What's your market outperform on this name? Why? So if you just look at, and I cover global metals and mining as well as oil and gas. And if you look at a commodity, what you're looking for as a cyclical commodity investor is let me find a commodity that has a great long-term story and is trading at a trough or below mid-cycle price. And U.S. natural gas fits that to a T. We've got this amazing story around the ramping of export of U.S.

42:33gas through LNG, AI data centers in the Northeast and Texas, insatiable demand for electricity where gas is the fastest molecule to them. And so the backdrop for U.S. Henry Hub natural gas is fantastic. And so getting beta to that story with a company that is the largest currently U.S. producer of natural gas, bigger than ExxonMobil, bigger than Chevron, bigger than any of the others, with a very strong business model around discipline. So it seems – and a brand-new CEO taking over. So what's not to like? Expand energy, ExxonMobil. We're just doing the EXs. See what we did there. Bob, you did in four minutes what you could do on an hour-long podcast.

43:10Who needs podcasts? Bob Brackett of Bernstein. A lot of Bs, a lot of Es. Bob, we appreciate it. Thank you very much. Folks, the NASDAQ is up nearly 3%. We'll see you on Power Lunch with Contessa Brewer right after this.

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