AI Stock Sell-Off: Tech Rout, Data Centers and Market Volatility

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1:01an ugly day on wall street as the ai trade suddenly implodes i'm kelly evans and welcome to the exchange after a post-election rally yesterday stocks are unraveling again tech stocks and the ai trade in particular the nasdaq is down almost 5.3 percent right now It's more than 10 % below its record high just from last month. The S &P is down 4 % to 7381. The Dow's down about 3%. The Russell 2000s are down 4.5%. We also have some huge drops in the chip space today with NVIDIA. NVIDIA down almost 9%. It's at 182. Qualcomm's down 11 right now. AMD, which had earnings just a couple days ago, they were strong.

1:42Those shares down 15%. And the Sox ETF is now down nearly 11 % for its worst day since COVID hit in March of 2020. Even worse, if you can believe it in the memory space, because shares of Sandisk are down 20 % right now. Seagate's down 15 and Micron is down the same amount. One of the other weakest areas lately has been the neocloud names. And that remains true today with CoreWeave down 13 % and IREN 16. And yields, if you can call it a bright spot, you would, except it comes on a day with so much pain in the stock market. The 10-year Treasury yield is now down a full half point from its highs exactly a month ago today.

2:20The 10-year is at 4.18 percent this hour, down from 5.3 percent in early October. And there you can see the two-year down, the 30-year down as well. Let's bring in our first guest, who says the election results yesterday answered one big question but created several new ones. Larry Adam is the chief investment officer at Raymond James. And Larry, do you think today's action is election-related? Well, I think, first of all, I think yesterday was just a big jump from what happened because people felt comfortable that there wasn't going to be any contesting of the election. But I think you have to look at the fundamentals.

2:54And one of the things that we've been talking about with AI was a big question that was going to need to be addressed. And as you look right now, I think people are a little bit looking at the data in the wrong way in the sense that I don't think that it's over when it comes to AI. In fact, when we look at the amount of building and construction underway already, which will continue, that's going to continue for at least the next year. And then underneath the surface, I think these tech companies are going to learn to adapt and they're going to learn that they can continue to build going forward.

3:24And they're going to build it either somewhere here in the U.S., if not up in space or out in the ocean. So I don't think that that this trade is over in the space. Bernie Sanders talking about a ban on A.I. Congresswoman Yasamin Ansari of Arizona tweeting yesterday, top of the democratic agenda on day one needs to be a pause in advanced AI development, regulation of this out of control industry and a ban on artificial superintelligence. Her tweet got 10 million views and provoked kind of a back and forth with Elon Musk, to whom she said, see you soon, suggesting what the subpoena power may be doing, Larry.

4:00So yesterday, many guests came on and said, nah, don't worry about it. It's not going to not going to really affect AI in the long run. Today, the markets are telling us maybe a different story unless you think this is a positioning wipeout. So two things. First of all, I think I've talked to one of my analysts today, and he basically says this is going to go down as one of the best Harvard cases going forward when it comes to education, right? Because this is going to really show you how poorly these tech companies have been able to actually talk about the benefits of AI over time. It's just been poor communication, and there's a lot of misinformation out there about what's happening in that space.

4:36So that's the first point. The second point is when you do look at positioning, I think that there's a trade right now that we've been talking to clients about. I think all the positive activity that's been going on in healthcare is being overdone. Valuations right now at the most expensive levels that they've been in 20 years. And in fact, where the pricing is right now, we believe it almost assumes that you're going to see a full reversal of all the cuts that were with the ACA and Medicaid. So we think that they're expensive. On the flip side, when you look at AI and tech and semiconductors, I actually think that you're going to see an opportunity.

5:11Because when I look out, you're talking about some of those names trading at a 30 % discount to where they have historically traded. And it's some of the lowest levels that we've seen. And when I look at next year's earnings, it's some of the healthiest that we've seen. And they continue to get revised upwards. So I actually would use this as an opportunity to slowly transition back into tech. When you say tech, can you get more specific? Because tech now basically means almost everything. I mean, as far as I'm concerned, it means mega cap tech. It means the semis. It means the memory names. It could mean software.

5:43It could mean, I don't know. Who am I forgetting? Cyber security, Larry. And I just want to reiterate what you're saying. You're telling people you have a trade idea today, which is health care is looking too expensive and faces now some risks. And that trade has been working. You say your approach would be kind of lighten or sell health care and go with tech. So I'm just curious, where in tech? Well, first of all, we like the mega cap names, right? They have the best diversified streams of revenue. So that's the first thing I would do. I would diversify across the industries. I still like the infrastructure, the semiconductor names because of valuations.

6:17If we are wrong in any format and that there is a slowdown, I do like the hyperscalers. Because if there is any slowdown in the building, you're going to see their net cash flow start to turn positive. and that's actually a good thing for them. And by the way, they are going to be the areas that really had the only existing capacity. They're just going to be able to charge more. And then you mentioned cyber. That's been a big theme of ours as well. I think that that's an area with AI becoming so important and the integrity of data being so important. I think that cyber continues to be a good place to be as well.

6:51So we continue to be diversified even within the technology space, but I would prefer to be higher up in the cap structure where you have a little bit more volatility and a lot more, you know, less sensitivity to interest rates and access to the capital markets. And I want to emphasize that you, a major firm like yours, Raymond James, might be a buyer and a washout like we're seeing right now. We often will see this around 1 p.m. Eastern that we we can often get the lows of the session. Hopefully, hopefully we don't go to new ones in the next couple of hours because it'd be hard for it to look a lot worse than it does right now.

7:23Larry. I mean, some of the messages I'm getting, people are saying we took out the lows and the S &P like a knife through butter on a picnic table. Someone else saying this is a crash. None of the corrections even in COVID felt like this. I mean, this is the kind of thing where we're all searching for an explanation. Why? Why at 10 a.m. Eastern time this morning? Why did we suddenly see the Nasdaq down the way that it's down? Why are we still selling off this afternoon? The reason why we're saying it that way is what is it what is going on with the internals of the market right now, right? For sellers, we're hearing reports about Walleye, which is a Minneapolis firm back in the day, New York firm exploded in assets under management the last few years.

8:01They're talking about returning capital. So is this a positioning sweep because the midterms and other catalysts, you know, the chips, like we're talking about this a little bit, they're down 31 % in a month, right? So is that a little bit of what's going on here? Yeah, I think the example that I would use, this reminds me a lot of what happened during into tariff turmoil, right, where everybody's shot first and asked questions later. And those knee-jerk reactions that we've seen historically do not really work out for investors. I think you need to look at the fundamentals, which is what we are doing.

8:35And if you take a longer-term perspective, which is what we do, I think the valuations at today's levels will pretend to prove to be a good buying opportunity. Because, you know, like I said, we've been talking to a lot of clients. And right now you are seeing a lot of that indiscriminate selling that you are referring to. And oftentimes when you see that indiscriminate selling where things are being sold for no reason or for lack of substantially significant reason, that's when you want to step into the market. So, yes, we would be buyers at this point in time. Again, not overly aggressive. You know, we want to adhere to our asset allocation and our, you know, our frameworks that we have.

9:12But I would look at this as more of a buying opportunity. I love the way you framed that because in many cases, like a few of the stats we're talking about, you'll hear worse since April of 2025. Well, that was exactly what happened during tariffs. That was exactly the kind of price action where, you know, they'd moved to price in a 10 or 20 percent downside to a stock or an average. And then the tariffs ended up being half implemented and then half rolled back. So for you, this is the same kind of thing. You're saying it feels almost like a scramble to price in, you know, something in the future that we still don't even know about yet.

9:45And that's exactly my point, right? Everybody during the tariff turmoil was talking about we were going into a recession, that margins were going to collapse, earnings growth was going to collapse, inflation was going to go double digits, and it never materialized. I think the same thing is happening here. And I give a lot more credit to these management teams that they will figure it out, that they will be adaptable. They will be flexible to make sure that they can manage through this, even if, again, even if some of this does slow some of the spending, which, again, longer term, I don't think it's going to happen.

10:17Right. I do think that this AI is a very important part of the technology revolution that's taken place. and I think it will continue going forward. The only thing that gives me - And in fact, you've had some tech CEOs on that have said the same thing. Here's the only thing that gives me pause. Yesterday, we spoke to an analyst who had downgraded Caterpillar over the summer. He covers industrials, you know? This is a guy who's literally tracking, you know, Caterpillar machinery orders. And in the summer, he was worried that this political risk was coming, that this blowback was coming. He said, I'm out here, I'm in the flyover states and I'm seeing this, I'm seeing the pushback.

10:51He was right. His call was right. Caterpillar is now red on the year. It used to be up 80 percent. So I take your point. I know that the A.I. bill that will continue despite all of this. But here's a guy on the front lines tracking this saying, I see a slowdown materializing. Well, he was right back then. I hope I'm right right now in the sense that I do actually like industrials as well. You know, one of the reasons why we continue like industrials is similarly 15 percent earnings growth is what we have factored in attractive valuations. I actually think that energy prices, probably our biggest non-consensus call is that we think energy prices go down to sixty five dollars over the next 12 months because we do think there's going to be a detente with Iran.

11:36If that happens, that'll help within the industrials, the transportation companies that'll get more building going on out there. So I actually do like the industrial space. And by the way, I think one of the compromises I think will take place in Washington will be that defense spending continues at that trillion dollars or more level. And that'll help the industrial sector as well. Yeah, I just, again, want to emphasize what you're saying. This is to you. It's a buying opportunity. The market, look, the triple Qs, let's show them on the screen for a second. We're at we're down about five point six percent, one of the most popular and frankly, one of the most successful trades generally in the market.

12:08Down five point six percent, point six percent today. We go down another$10 or so, we're going to trigger some trading halts. You probably, let's hope we don't do that. But this is a trade where the volatility is the price you pay for the return. So the point is to ride out these big washouts. There's a reason why the triple Qs are higher volatility than the S &P. There's a reason why they have higher returns over time than the S &P. There's a reason why these things work the way that they do. I guess the question is, though, did yesterday's results literally bring an earlier end to the AI-driven business cycle?

12:43I do not think so. In fact, if anything, I think it extends it. Because if there is any slowing down in the capital expenditures, I just think it elongates the whole build out. And by the way, one of the things I thought the client's about with technology is everybody's focused just on AI. There will be a next generation driving the technology revolution. and whether that's robotics bringing AI into the physical world, whether that's quantum computing, there will be other technological revolutions that will continue to drive, you know, the revenue and earnings in this particular sector. Unless they come out and tell us that it's going to take everyone's jobs and, you know, maybe engender a little bit of pushback.

13:25I guess the final word I'd say then on this point, Larry, is in some ways you could say America has spoken. and the concerns they have about the technology, how it's going to be used, what it means in the workplace, how it's being deployed. I think they want that message to be heard. And so how can we be so sure that it's just not going to have an impact overall on the trade and on the build out? Because, as I said, I think there will be a Harvard case study about a lot of the benefits and whether it's the fact that it's created jobs, whether it's the fact that there's been, you know, when it's created economic growth with all the building that's taken place.

14:08In a lot of places, there's a lot of concerns about water, but they use a very little bit of water. If you look at some of the other places that they've built these data centers, they've been able to reduce taxes, you know, reduce some of the costs for electricity over time. I think if they continue to get the messages out, I think that you will see a lot of this compromise take place. Yes, they'll put more guardrails on how AI is built out, but I ultimately think it continues because it is a very important part of our economic growth trajectory, right? Our economists suggested somewhere between 30 to 50 percent, depending on how you want to account for AI, is what's responsible for the economic growth that's taking place today.

14:49You take that off and you start to talk about an economy that's going to be much more challenged going forward. Yeah, I always think back to the launch of Chad GPT October of 2022. Has it been that long now? Yes. Yeah. So that was the moment when, you know, we had tech stocks down 30, 40 percent that year. Jobless claims were up. The Fed had tightened aggressively. We've all thought the economy could be sliding into a recession. Then along comes this technology. Larry, thanks very much. Appreciate having you on. Go ahead. What were you going to say? No, no, I was going to say, Tamara, you'll find out a little bit.

15:22You were talking about the jobs. I still think there's plenty of jobs that are going to be created, whether it's in the healthcare space, doctors, nurses, when it comes to services, eating out, you know, in the skilled trades. We still think there's plenty of opportunities to continue to drive the growth in employment here in the United States. So I think some of those near-term fears of AI taking people's jobs are a little bit overblown as well. Good point. We'll get the job support in the morning. What an environment to get that in. Larry, thank you so much. Really appreciate it today. Thank you, Kelly.

15:51Larry Adam of Raymond James. And also don't miss our interview with San Francisco Fed President Mary Daly. That'll be tomorrow here on the program. 1 p.m. Eastern. We'll also get her reaction to the jobs report. Let's take a closer look now at the chip stock sell-off, with the semis down 10.5 % for the Sox ETF. And yes, Qualcomm missed estimates in its earnings last night, but it's hard to connect the dots. This move has also been much broader than what we're just seeing today. The Sox ETF is down 31 % in the past month. And Stacey Rasgaard knows that well. He is the senior semi-analyst at Bernstein.

16:24Stacey, what are the catalysts for you and what was the outlier? Was it the price action going into those highs that we were making a month ago? Or is it the rapid sell off that we've seen since? Well, I mean, look, we've actually had fundamentals even since the highs get better. But this is just very clearly a very rapid pivot in narrative and sentiment. And it's, you know, nobody right now is questioning the earnings like next year. I think there was always concern about both achievability and sustainability beyond that. And I think given some of the more recent changes and there were some, you know, little puts and takes with some of the hyperscale reports and then now the election where, by the way, I think a Democratic win was probably expected.

17:08I'm not sure that the pivot in Texas, though, was expected. And that has some broader implications potentially. So all of that is weighing on sentiment. And we've just got a very, especially over the last week or so, a very massive change in sentiment and narrative. I think since the peak in June, I mean, maybe you can just argue things around a little too far, too fast. And we had some stocks at that point that were trading, quite a bit of the group was trading at very high valuations. And we're on the other side of that extreme now. The group is not expensive at all. And many of these stocks are at multi-year lows in terms of valuations.

17:41But I think that's that's what's what's going on for now. Fundamentals look fine, if not strengthening. People are increasingly less willing to believe those fundamentals. So we've we've had a pretty rapid pivot in sentiment. And clearly there may be some other technical issues going on on today. It's near the end of the year. And, you know, there's a lot of leverage in there that may be coming out. And you know how it goes once things start to roll like the snowball rolls down the hill. Sometimes it's hard to stop. So I think that's what's going on today. Right. It could be a chance for people to jump in if they listen to you.

18:12You say Larry was just saying earnings are going up next year. This is a tariff tantrum kind of moment. That's all well and good. But what if politics are a leading indicator for where those earnings could be headed? Yeah. And to be honest, the whole political situation, it wasn't just like it was a blue thing. It was fairly bipartisan, right? And if you read through most of the talking points, they're not necessarily so much we want to stop investments. It's more we want to put guardrails and conditions on it, which is not necessarily a bad thing if you think about it. I think your prior guest also talked about maybe extending the cycle.

18:47There are other things that could potentially do that as well. Most of these guys right now are still very much supply constrained. Demand is still well above supply. And you could argue that all of these things actually are preventing the build-outs that were on the table from going completely nuts and maybe even extend it longer. I'm not saying that if we get a cut to next year and it extends longer, I'm not saying that that's great. But I mean, that's kind of the scenario that we're getting priced in now. But you could argue once it's priced in, if we actually are going to extend things, that's not a bad thing.

19:16It actually starts to it helps to smooth out the peaks and the valleys. As we roll the calendar ahead in November, the next couple of weeks kind of quiet. We've got Thanksgiving holidays are coming up. The lame duck session doesn't start till after that. I mean, are there names that we could hear from in earnings from executives, from investor days, from what have you, where they could say, hey, look, we know what just happened. But we think that this is demand. This is what we expect. I think those data points would be helpful. Well, I mean, NVIDIA reports on November 17th. So yeah, that'll probably be a pretty important call, I would think.

19:50Broadcom reports in early December, I believe. And there's a number. I mean, we're still in the mix of semi-earnings. So there's quite a few names that are reporting now. Now, to be fair, most of the reports we've even seen, there's been some puts and takes overall. But I would say that the general outlook and performance around the data center and AI space has still been very solid. Most of the weakness that we've been seeing so far is on the consumer end of things, PCs and smartphones and the like. And the reason there, by the way, you can also read that as positive. The reason like PCs are so weak, for example, it hit Intel like a week or two ago.

20:27They're weak not because demand is weak. They're weak because there's no memory to build the PCs. And why is there no memory? It's because AI is sucking all of it up, right? So most of the data points from earnings have been very supportive of data center and AI. It has not helped the stocks. So regardless of what NVIDIA or anybody else says, I don't know what impact it's going to have on the stocks. But the stocks are already down pretty materially. Do you think Intel is a buy here? It's went down 50 percent or more from the peaks. Do you think AMD down 15 percent today? Is that a buy? I mean, across NVIDIA down, what is it, 9 percent now?

20:59Is that a buy? And it's funny, NVIDIA, like as much as it's down today, it's actually outperforming the rest of the group. You know, it is much cheaper. And that does help question a little bit. But I'll be honest, I'm a little surprised at the AMD performance. Not that it's down, but that it's down so much more than the group. They actually had very good earnings the other day. They saw some PC weakness, the same as Intel. Although for AMD, it's just not that big of an issue. It's not that big a piece of their business anymore. In the meantime, again, their data center business, both on the CPU side servers as well as GPUs, was very, very strong.

21:30And they gave some pretty strong outlook with strong visibility for next year. Intel's sort of an interesting situation because, again, the stock's gotten hammered. You have to remember, most of the run that it had that was mostly on narrative and vibes, you know, the story, it's still a slog. And, you know, they've kind of admitted it. I would also say that beyond the PC weakness for Intel, there's also been a building narrative that their execution was getting a lot better. And as it turns out, like maybe not quite as much as people would have hoped. We're a year into the server cycle. We're in a massive server cycle right now.

22:01Their manufacturing footprint is still off sides. They've still got too much PC capacity and not enough server capacity. And so they're trying to move it over, and it just takes time. And so I think the whole execution narrative around Intel has been taken down a peg as well. It's great to hear you talk through these stocks on a day like today. Again, this is the whole point of having a shopping list and all these things we say, right? These are the moments that that gets tested and your insight helps. But it's a tough day out there for sure. Yeah, it is. Stacey, thanks. Yeah, you bet. Bernstein, Stacey Rasgon.

22:32Still ahead, amid the continued sell-off in the neocloud names, what happens if those companies end up struggling to repay some of their debt? We'll look at which names and sectors are most exposed. But first, we'll get the traders' take on this sell-off today. Live from the VIX pits at the SIBO in Chicago, that's next. As we head to break, here's another look at this major sell-off, the Nasdaq down 5.3%. The exchange is back after this. Computers 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.

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24:29Welcome back. The fear gauge, the volatility index, or the VIX, is spiking today. It's to 27, which is its highest level since early April. Oliver Rennick is standing by in the VIX trading pit at the SIBO with more for us. Hi, Oliver. Hey, Kelly. Great to have you guys here. We're actually in the S &P pit. I'm with Matt Carr joining us. He's the lead S &P trader for Belvedere trading. Matt, I think just firstly, it seemed like even some of the big guys were kind of caught off guard. Tell me what you saw over the last call, 24 hours here. So yeah, I'd say even 48 hours. I'm not sure what's more surprising, the 2 % rally that we saw yesterday after the election or the 4 % break that we see today.

25:07Clearly, change of political environment. I think the key here now for the trader, particularly professional traders, is this temporary shift in sentiment? Are we looking at something bigger with the fundamentals? And as portfolios are being repriced here, it's going to be a key distinction. When you look at vol, because this is what you guys are doing here, the S &P 500 vol, we hit a high of 28 today. Big VIX move, one of the biggest since April 2025. But I still look at the market down more than 3 % S &Ps. Tell me, is the VIX where it's at? A little low? A little high? What do you see relative to S &P 500 vol?

25:38I think that's hard to say. I think we're seeing a lot of swing orders, a lot of large volume trade in both ways. Need to wait for the dust to sell of it to really determine if VIX is high or low. I think it's a very subjective thing to ask. So we got to wait and ride this one out a little bit. Size of moves, generally, some traders watch where market makers are positioned, the gamma stuff. Should we just be braced for big moves in general at this point? In the short term, for sure. Like I said, political change, there's always something to it, something we always keep an eye on. But again, is this temporary shift in sentiment?

26:08Or are we really taking a broader look at the approach of fundamentals and looking at a larger macro shift in policy and what we expect to see in the trade down here? A week ago, Friday, we were looking at vol that seemed, I talked to some traders, you said the vol was kind of low based on what the market was doing. But one of the explanations that seemed to resonate was that people were just selling stock instead of rushing to buy hedges, that people were getting liquidated. There's rumors about what's going on with hedge funds. Does today look different in that people are buying hedges? Is there a dash to protection?

26:38Again, I think that's an interesting question. I think risk tolerance in general has never been higher in these types of products. for any type of trader, but particularly these larger firms. So it was vol low. I think you can make the argument it was low. But as risk tolerance is high, these firms can take on these positions. Again, I think it's going to be interesting to see how this all unwinds from here. This morning, it was very loud. It was a bit chaotic. It's definitely cooled down. Tell me generally what you experience as the day goes on and kind of what the trajectory of the vibe was here from walking in this morning to where we're at now and what you think maybe we'll be at here over the next couple hours.

27:12Great question. Yeah, we're off the lows a little bit. But, you know, who knows how this goes. Point points. Any little headline, any little tweet, and we could rebound sharply and we could keep breaking. It's a lot of uncertainty right now. A little lull now. Typically, we see this around the lunchtime anyways. So, yeah, we'll see in the next half hour here. I expect to see some action picking up again. Yeah, OK. Lunchtime calm a little bit here. But I'm not seeing the food quite line up. There's a trader who just started, I think, about a month ago. And I saw him running for the first time today.

27:38Kelly, back to you guys. I know. It can be crazy. Oliver, thanks for that. We really appreciate it. coming up bad day for the banks as well today the Invesco KBW bank index down about three percent seeing its worst day since Feb but there's an interesting divide shaping up within the financials we'll tell you where even more of the selling pressure is ahead you know Kevin sometimes I feel like computers are the only thing around here that are getting smarter yeah my model hasn't had an update in a while but that changes now we think that we can smarten these listeners up about all things related to this crazy new future.

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29:32Welcome back. Microsoft down 3.5 % today. Reuters confirming that Microsoft declined to expand its cloud computing deal with Nscale at a Texas data center. Is it a preview of more to come or are people just jumpy about headlines? John Ford is here to join me and unpack this. Well, Kelly, I've got I got a metaphor for you to kind of help investors understand this. And it's a doozy because anybody who knows my metaphors knows what to expect. The question is, how fast can you serve 10 tons of sushi? That's what this AI data center thing comes down to. And it's the time element, because if you don't get this built out and usable fast enough, it spoils.

30:13Because they're built with leverage, and they need to be able to get the cash flow out of them in order to pay the bills. So there's a situation, five tons of sushi won't do. It has to be 10 tons. And so why this Microsoft thing might be concerning to some people is Microsoft had the option to double its sushi order, and Microsoft's a really big eater. And they said, eh, no thanks. I'll just kind of stick with my existing order. And that's like, boy, if Microsoft's not going to eat it, who's going to eat it? And was this a direct result of the election or this was something that was already in the works?

30:44You mean Microsoft's decision? I don't know. Don't know. I'm just saying this headline being out there, that's the kind of concern it raises. I think the election piece of it is, hey, with Democrats in control of Congress, it's going to be harder to get a new sushi restaurant approved and pass inspections and all of that. And you've got a number of neoclouds who just specialize in serving only sushi. And if they can't get their restaurant up and running and serving that sushi, then they're going to have trouble paying their lease, and they're going to go out of business. Turning on the channel right now and going, why are we talking about sushi?

31:20That's what I was going for. I like the analogy, though. So I guess the question is, what would you be watching now because there are some arguing that by slowing down the pace of all this, you know, it could actually be better in the long run. Maybe. I don't know. It's certainly better for some people. Yeah. The Elon Musk argument is as long as you're not a sushi specialist, if you're Cheesecake Factory and you serve a lot of things, including sushi, you're okay. You can pay your bills on more than just sushi. And that's the situation certainly that SpaceX is in, the situation that the hyperscalers are in.

31:59The neoclouds, not so much. So hey, if it slows down, it benefits, you know, your cheesecake factories out there. And everybody obviously loves the cheesecake factory, including Saddam Hussein. Would be a weird thing to come out of this, that some of the winners, so Musk spends half a billion dollars on this election, doesn't get the outcome he wanted. It may still benefit him by hurting his competitors. I think we shouldn't assume, as the investing public putting us in there, that just because the Democrats are in power that this slows down dramatically. Could happen, but I'm not sure the entire public understood what the policies were going to be for these various data centers.

32:39Maybe they were already going to do some of the things that people want them to do in terms of giving payback to the community. If you look at Virginia and what the AWS data centers have done down there, they have given a lot back. So maybe. But isn't the Virginia governor now amongst those talking about slowing things down? Well, yes, because data centers are unpopular, perhaps even despite. By all the people who don't have familiarity with them, because we talked to the electricians who are building out the Loudoun County data centers. They love it. Of course. They love it. But the noise pollution.

33:12They live in the same area. Well, but but if you're making us all of them, if you're an electrician making money, you can deal with the noise. It's like the sound of the cash register ringing for you. I guess there's some other places where they don't. I don't know if he even talked about the noise. He said most people don't even know we take people on tours of these facilities and they go, oh, I didn't know that was a data center. There might be a repackaging that happens here where, you know, around the edges, maybe there are a few changes. But largely the policy is what a lot of these data center providers are willing to do anyway.

33:43and they look like, oh boy, you know, you got me over the barrel here. I'll do it. And it's allowed to go through and it doesn't slow things down that dramatically. We don't know. We'll have to see. I mean, there's certainly, it's in the interest of the new Texas governor next year and going forward for the economy there to be good. And if it hinges on the data centers getting done, well, we'll see. That's what a lot of people are saying. It's a great point. John, thank you today. Appreciate it. John Ford with his sushi analogy. From big tech to the big banks, kind of same topic, different way of looking at the issue.

34:17The KBE, the big bank ETF, is holding up relatively well today. It is down two and a quarter percent. But the industries that are more capital market sensitive and tied to the AI financing buildout are more under pressure. Goldman down six percent. Responsible for about a third of the Dow's losses today. Morgan Stanley down six percent. The alternative asset managers sharply lower, too. KKR, Aries, Blackstone, Apollo and Blue Owl. Blue Owl, of course, one of the names tied to financing of data centers. It's down 7 percent. Leslie Picker joins us now. I don't know if you have a sushi analogy. I know.

34:48For how to understand it. But I think we can all follow the money, certainly. And with alternative asset management, I mean, is that where some of this money is ending up? It is, Kel. And that analogy did make me hungry. I don't know if I have the perfect segue into the private world. But you're right. The big financiers to the infrastructure buildout are all plummeting today on concerns that anti-AI sentiment on display during the midterms will lead to stalled or thwarted projects. Private equity and private credit have leaned into this theme in recent years, especially as their software exposure came under pressure due to AI.

35:24And data centers have been a key way that they have participated in the AI theme. So a recent report found that private firms own or back an estimated 25 to 30 percent of active U.S. data center capacity. As of December 2025, 78 private equity firms backed an estimated 13 to 17 gigawatts of active data center capacity across 670 data centers or campuses. The report found that private firms have announced at least 26.8 gigawatts in development or under construction as well. This will amount to over half of the 50 gigawatts of data centers in the pipeline by 2030. This research was published about a week ago, and it was conducted by Americans for Financial Reform, which says it's a nonpartisan, nonprofit organization formed after the financial crisis to advocate for a more equitable economy.

36:21The group listed the five largest private equity data center owners in the U.S. by active or planned capacity, which include Brookfield, Aries, Blue Owl, Digital Bridge, and Apollo. Kelly. And so I guess if you were concerned that some of this build-out isn't happening, that puts those loans into question. It definitely raises the cost of capital, especially if the timeline becomes more stretched due to moratoriums or exploratory conversations which try to evaluate the impact on the local communities there. So if you're someone who is owning these or backing these, it just expands the timeline by which you would get repaid potentially.

37:02And it also, due to potential delays and other changes that you could, you know, wouldn't even be able to anticipate right now, it could increase the cost of the project as well. I'm glad you mentioned that on a day when we're talking about how slowing it down could maybe be good for some of these companies in the long run. Here's an area where it might be harmful, not a harmful, but a headwind. Leslie, thanks. Thank you. Appreciate it. Leslie Picker. To Frank Holland now for the CNBC News update. Frank? Hey, Kelly. We have our first resignation in the wake of the Democratic victory on Tuesday.

37:29Harmeet Dillon, a former personal lawyer for the president and head of the DOJ Civil Rights Division, is now resigning. It was a mass exodus of career attorneys during her tenure as she switched the office's traditional role to favor conservative causes. Paraguay's president resigning today amid fallout from a banking crisis. President Santiago Pina was facing impeachment after the country's central bank sees major digital lender Ueno Bank after it collapsed. More than 60 percent of the adults in that country are customers of that bank. Protesters clashed with police today and several of the bank's executives were detained.

38:02And sales at Nintendo's flagship Switch 2 plunged more than 40 percent from a year ago in its fiscal second quarter after the Japanese gaming giant rolled out price hikes amid soaring memory costs. At the same time, Nintendo released a remake of the Legend of Zelda game today that investors hope will boost sales in the coming weeks. Kelly, back over to you. All right. Thank you very much. And another reminder of what's happening in the markets here spilling over into real life. Frank, thank you. Thank you. As we head to break, just take a look at the market sell-off here this hour. The Nasdaq composite, we're a little bit off the lows, but not by much.

38:32Down about 5.1%. We've shed$800 billion in MAG7 market cap today. That's more than Visa's worth. Ten-year at 482. We'll be back with more right after this. Nasdaq is down more than 5 % this hour. Not a misprint. I guess it's on TV. But your glasses are not mistaken, nor your contacts. It is a really bad day across the board. It's the worst day since April of 25 for the NASDAQ. The S &P is off four. Bloom Energy and Sandisk are among the biggest losers. App Levin is bucking the trend for what it's worth, up over 28 % today, thanks to earnings. My next guest is looking to buy into the AI sell-off.

39:09But caution, some of this is a needed recalibration and growth expectations. Let's turn to Victoria Green, CIO of G-Squared Private Wealth. Are you salivating on a day like today, Victoria, or crying? No, I'm somewhere in between. Not quite eating sushi here at all or having any fun today. Look, it's a brutal day today, and it's obviously one we think is a little bit of an overreaction. I think you've got some really good supports around here, around 70 to 20, the 200-day moving average on the S &P. And I just remind people, we have multiple AI companies now that are solidly in a bear market. And if you look at days and buying after a 4 % drop, it's happened 57 times since 1950.

39:48And typically, the average return is plus about 180 basis points the next day. The question we have to ask ourselves, is this a pullback and uptrend, which is what I believe, or is this the end all be all, the wheels are coming off and everybody just needs to buy T-bills? I don't think we're there yet. I don't see a recession yet. I see this as liquidation. I see this as technical and absolute recalibration. Look, it's going to be more expensive and harder and longer to build a data center. does not mean that data centers are going to stop being built. They may have to be built other places. They may have to be a little more equitable on the cost sharing and the grid issues.

40:21But at the same point, this AI trade, in my opinion, is not dead here. And so it's a good discount. Anywhere you're taking action? Yeah, honestly, I do still like the memory stocks. And I understand that it hasn't worked. And I've talked about that before of like, hey, I'm interested in memory as it's selling off. Listen to every single earnings call so far. it's memory crunch, memory crunch. We need memory. You know, nobody can find it. They can produce as much as they can for the next six years and everybody will buy every single terabyte. And so I look at this and I say, yeah, I think SanDisk and I'm not going whole hog today.

40:53I'm not advocating like lever up and go buy this. I'm saying, hey, buying volatile dips like this, you mentioned this is the worst since 2025. Buying a volatile dip tends to be good as long as we're still in a non-recessionary period. You know, there are time periods if you were in the global financial crisis that obviously buying dips like this were painful. But as long as we're in an uptrend, as long as we do still have some investment, I see memory, I see chips. Chips are now finally hitting oversold on RSI. I think things are a little bit attractive here because it's not a fundamental deterioration yet.

41:25Now, we are going to have to recalibrate. We're not going to have quite the Wild West in Texas for data centers, but I still think data centers are going to be built. Texas is business friendly, just need to be more orderly, more planned, and a little bit more regulated. All right, Victoria, thanks so much for sharing the kind of what you're thinking through this, some areas where you're making moves. It's good to see you. Thanks, Kelly. Victoria Green with G-Squared today. Coming up, the tech sector is down 17 % now nearly from its all-time high, and that was just one month ago. It could have a big impact on Anthropics IPO timing.

41:57It's expected in the next couple of weeks. We'll talk about the biggest questions now hanging in the balance next. Welcome back. Anthropics IPO is widely expected to be the largest ever and was supposed to dominate the chat here in November. That public debut is expected in just a few weeks. Does today's sell-off change any of that calculus? Let's get out to Kate Rooney with more on that story. Hi, Kate. Hey, Kelly. Well, from what I'm hearing, it very much changes the valuation math on Anthropics mega IPO that's coming up. The bull case and the number that was being floated when they first filed confidentially this summer is closer to$2 trillion.

42:33I'm now hearing that $1.5 trillion feels like a stretch. I talked to some investors this morning. Given the discount and what we're seeing with tech today with the sell-off, the data center pushback is also very much a part of that story. So midterms put a spotlight on all of this with a Democratic sweep, both chambers of Congress, plus you have a Democrat in the governor's mansion in Texas, where about 30 % of new projects for these data centers and AI are being built and are located. It's not great news for the AI labs. They rely on growing their compute capacity to grow revenue. That's sort of the simple explanation of all of this.

43:08OpenAI trying to reconcile some of this data center pushback this morning with a new set of basically promises to communities. They outlined commitments for future projects. This is in a new policy blueprint earlier today. It does, Kelly, feel a bit like damage control after the midterms, but they did say they've been working on this since August. The election outcome has added some urgency, at least according to Chris Lehane, who runs global policy there. He said AI was on the ballot and the policy window, as he put it, is now open. There are also some questions, Kelly, about AI legislation, more scrutiny out of Congress when it comes to this technology, and then tougher regulation.

43:44It was mentioned explicitly in Anthropics S1 among the very many risk factors. Another risk in all of this, there is a theory that the gap between the AI labs, which have been the leaders, and then the rest of big tech could get narrower. These big tech companies already have data centers on the ground. They can more easily just retrofit their existing sites. It might not be as much of an advantage to the AI labs, and there could be a catch-up situation here, Kel. Yeah, maybe home sellers can sympathize because they're basically facing a situation where as if they had sold their IPO and come to market in August, they could have been at$2 trillion.

44:18Now you're saying maybe they'll be at one and a half. There's a few more weeks to go so they could make up some ground, but that's fascinating. Kate, thank you very much. Great reporting. Kate Rooney. Coming up, it's the worst day for stocks in more than a year and a half, going back to the tariff tantrum in April of 25. How much more pain could be ahead is next. Dow down over 1 ,700 points at the session lows today. We're just a hair off that level right now. The Nasdaq hitting correction territory down 10 % from last month's highs, and the S &P having its worst day since April of 2025. Let's talk more about the technical damage that's been done today.

44:53Charter Worth. Carter Worth. That's good. I get that plenty. Don't worry. Charter Worth. I bet you do. He's a founder and CEO of Worth Charting. Carter, it's great to see you. Likewise. I'd love to hear you talk about this, both from a narrative point of view, as to whether you think there's a kind of a positioning issue at play here and kind of what you see the signals being now. Sure. Well, let's go for a narrative, which is really the most important, but just the immediate here and now. The S &P is down 4%. So that's a fairly rare thing. Let's just put it in context. How many sessions does the market drop 4 % or more going back the last 30 years?

45:29And they're only 45. Now, think about that. 45 times, that's out of 7 ,500 trading sessions. So that's an instant rate of almost 0.0005%, that kind of thing. And when it's happened, it's been universally clustered in the 45 instances around the financial crisis and COVID. So if you exclude those two, which account for 30 of the 45, this is an exceedingly rare thing. Okay. But as to the narrative, I think the important message, and we all know it, but it's good to remind ourselves, I remind myself, is that weakness, shocking weakness doesn't come out of nowhere. right? And so the precondition for weakness is weakness.

46:12The market has been struggling for not only days, but weeks and weeks and weeks. Internally, we know that the breath has been poor. Many stocks themselves, a full 35, 40 percent of the constituents in the S &P are down more than 25 percent from their respective 52-week highs, even though the market is only down 4 or 5 percent. So this weakness, if you will, it's not out of nowhere. That's important to note and say. And great crashes, it's always the same. Think about even in the 1987 Black Monday, the market was down 22 % before that, right? And so the weakness in semis, the weakness in key industrial stocks and financial stocks, big broker dealers, et cetera, and so forth, has been going on for weeks, for months.

46:59And the hope always was, and it never is right, that something else will take up the four. And that we've seen that, this impetuous move in staples. But the market structure is worse. Take away today, we were unchanged over the past three, four months. But structurally, we were worse. Many stocks damaged, hit hard, and taking up the four, if you will, huge spikes in defensive names. But structurally, that's worse. The spikes can't continue. Proctor doesn't go higher from here. And the ones that are sick get sicker. Well, I like what you said, that the weakness is a precondition for weakness. And it does.

47:40There's so many good analogies today, but from sushi, I'm thinking about sharks, you know, circling as they see kind of blood in the water. Leave it on that positive note. Carter, thanks very much. You bet. Carter Worth, that's it for us. Thank you for watching The Exchange. Much more on this sell-off is coming up next hour on Power Lunch, right after this quick break. The real cost of a break-in isn't your valuables. It's the feeling that your home stopped being safe. SimpliSafe keeps danger away from your family with three layers of protection. One, smart AI cameras and live U.S.-based agents help stop intruders before they break in.

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