Mary Daly on Rate Hikes, AI Sell-Off and Jobs Friday 11/6/26

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0:39Mary Daly: They also have integrated risk management technology and nearly unlimited customization so you can shape the platform to fit the way you trade. And when you do that, you can analyze trades from angles you won't find anywhere else. Go see what that looks like at schwab.com slash trading.

0:54Kelly Evans: You're listening to The Exchange. Here's today's show.

1:01Kelly Evans: Thank you very much, Scott. Tech stocks are trying to claw back some of yesterday's two and a half trillion dollar loss. I'm Kelly Evans and welcome to the exchange. The Nasdaq is up and leading the way today after its single worst day since April of last year. Currently up about one percent this hour. The S &P up a half percent, so we're off the session high. And the Dow, by the way, is turning negative. Talk about, I mean, come on. You dropped 1 ,500 points. You're supposed to get a rebound. The Dow is now in the red. Semis, memory, and neoclouds are snapping back. But again, keep an eye on this market tone, which has been softening throughout the day here.

1:34Kelly Evans: The semi ETF is up 2.5%, but it was down like 10 yesterday. iRent is leading the way. That's a glimmer of good news. It's up 15 % for those investors who have seen some losses. Earnings, another catalyst, along with the tech rebound. Nuclear trade, OGLO, up 20%. That CEO joins us live ahead. We're looking forward to that. Big tech is mostly higher, with Tesla and NVIDIA the notable gainers. but NVIDIA is up 2.5%. The group shed a trillion in market cap yesterday, and it's only up 1 % this hour. And then there's the jobs report, 165 ,000 jobs reported. That's 100 ,000 more than expected. We're looking for the impact on the markets, a little bit of an impact on rate hikes, December hike back up to 83%.

2:16Kelly Evans: It was in the 70s earlier this morning. So let's start right there with the Fed. San Francisco Fed President Mary Daly joins us to kick things off this hour, respond to jobs, what's happening with the AI trade, and so much more with our very own CNBC senior economics reporter, Steve Leisman. Steve?

2:32Mary Daly: Kelly, thanks very much. We have Mary Daly here on Jobs Friday, which happens, she happens to be a labor economist and from San Francisco, the home of big tech. So you would think we might have planned this this way. Thanks for joining us, Mary. Oh, I'm delighted to be here, Steve. Good timing. It beats everything else. Give us your thoughts on the way that Kelly Evans presented those jobs reports, 165 ,000, over 100 ,000 more than the estimate. What in your estimation is going on in the jobs market?

3:05Kelly Evans: Well, I think this is good news for American workers. The jobs are out there. People are getting hired. We've been stuck in a low hiring, low firing environment. And this is just a little more hiring, which I think, again, is good news for Americans. I also read from the jobs report that while the jobs are good news, wage growth is not booming. So the job market remains stable and solid, but not booming. And you see real wages falling because those wages are not really keeping up with inflation. And I think that's the crux of this. Good news on the jobs front, not so clear that Americans are going to gain ground in the labor market.

3:41Mary Daly: Mary, one of the ideas of why people have been estimating low jobs numbers is the issue of job supply or labor supply. The thinking was we didn't have the workers to fill these jobs, do those kind of numbers. Do you have a sense of where the labor is coming from or whether or not we can continue on a sustained path like this?

4:00Kelly Evans: You know, if you look at our labor force participation rates, which are the real crux of how we get labor supply, it's not only birth cohorts, it's how many people are participating across their lifespan. And we're just seeing those numbers come up a little bit. And that's good news, right? Americans want to work. When the job market looks to be improving, more people come in. I think those two things are consistent. Jobs are available, more workers come in. And I do feel hopeful when I think about the American workforce. If you go back to the later part of the 2019, 2017, people were talking about, oh, there's no more jobs.

4:34Kelly Evans: People won't come in. We've we've eked out all the gains from labor force participation that we can. And yet people keep coming back. So good labor market conditions bring workers back in. And I'm pretty optimistic that that will continue to happen.

4:47Mary Daly: I'm afraid, President Daly, that was the easy part of the interview because that was the jobs part of the mandate. Tell me your views on the inflation side of the mandate. Do things seem to be getting better to you? Do you have any confidence that we are moving towards the two percent target?

5:02Kelly Evans: Well, I'd like my confidence to be higher, frankly, Steve. And you're right. This isn't just the hard part of the interview. This is the hard part of equation for Americans. They see that they can get jobs, that they continue to spend. They're not out of the game. But they are on a treadmill of high inflation. This has been high for too long, almost six years. And we're really starting to feel the burden of that spread everywhere. It's been burdensome for a long, long time. But people are just at the point where they say, hey, inflation, I'm doing well in everything, except I can't keep up with inflation.

5:35Kelly Evans: So that has to be our number one priority. And the fact that we have a solid labor market gives us the latitude, really, to just get that job done. So we have to be on that path.

5:46Mary Daly: How do you feel like, what is it you feel you need to do in order to get that job done from this point forward?

5:51Kelly Evans: I think we are doing that. You know, I was really supportive. I completely thought that that was the right move to move in September. I also think that it was good to be on hold at the last meeting because the world is filled with uncertainty. We have the uncertainty today of what will tariffs be, what will the war be and what will happen in AI. So that's important to think about. But we also have underlying inflation that just is more stubborn than I would like it to be. And we need to get that down. So my expectation is we're going to have to tighten policy further. exactly when and how much is still to be decided because we just have to take all the variables that are coming in.

6:31Kelly Evans: You know, I heard Kelly talk about how moving around, how volatile the world seems to be in many ways. Those volatilities are something that you have to take into account, collect more information, and be deliberate but more gradual in how you get there when you don't know exactly where you're going to need to head. So, but more is likely to be needed, and certainly we're prepared to, I'm prepared to do that if that's what the economy calls for.

6:56Mary Daly: Let's layer in a third aspect of this, which is what happened in the market yesterday, which was a pretty major downdraft in tech stocks. How do you process that in terms of the outlook for the economy? When I look at the components of GDP, I see an awful lot of AI in it. And I'm wondering if that cools off, what that does to your outlook, your outlook for rates and inflation? Sure.

7:18Kelly Evans: So if you think about the AI trade, you know, it did come dumbed down. It's been building for the last several weeks, and we saw a lot of that come through yesterday. But what people, so far it's been orderly, and what it does is it reminds us that, you know, there's a repricing when the enthusiasm and the delivery of ROI doesn't seem to match up with investors' expectations. But there's still quite a bit of commitment to AI as an important technology, and we want to be in that game. And so if I'm in San Francisco, I'm in San Francisco, so I see this every day, you know, maybe we are going to get a repricing, but we're also going to get the continued deliverables on what AI technology can do for our economy and our ultimate rate of growth.

8:02Kelly Evans: So what does this mean for the near term? Well, in the near term, as you said, business investment has been, in AI particularly, has been a big driver of growth. And so if this repricing, it signals a slowing of demand for those services or those goods, you might see growth come down a little bit. But I'm not very worried about growth slowing substantially because we're seeing businesses across the group, not just AI businesses, who are also saying, the future, I'm cautiously optimistic, the future looks good, but we have to get inflation down. And that's what businesses across the board are thinking.

8:36Kelly Evans: This isn't simply AI optimism. AI is driving a lot of the numbers, but other businesses are also cautiously optimistic about the future. Yeah, I'm Mary, it's Kelly here, and I'm a little sympathetic to the point of view, which is one that Barry Knapp and a few others have. But this idea that rate hikes are exacerbating the K-shaped economy and we see that real wage growth slowing. So I'd hate to I'd hate to try to fix a problem, but make things worse if the inflation problem was something that was going to kind of, you know, not reaccelerate from here. But I just wanted to say that out loud kind of as a side matter, because the question I'm actually curious about asking you is is just kind of how you feel about the changes at the Fed.

9:20Kelly Evans: You know, the Warsh era, so to speak, you know, the family fights, the, you know, fewer meetings next year, fewer live meetings in the year after. A lot of people are curious about what that's going to mean for those intervals and making decisions like this. We're still waiting on the task forces. How do you feel about all these changes? I think to change in an institution that's over, you know, 113 years old is a positive development. We should be adopting, adapting and changing as the economy changes. And the thing that's always durable and never changes, and this is really important for, I think, your listeners to hear, is that you've got people dedicated to doing the job that Congress gave us, price stability, full employment or other core mandates.

10:01Kelly Evans: And we're focused 100 percent on that. So those are details about how we do things, but it's not anything about what we're doing. What we're doing is focusing on inflation and our interest rate policy and the labor market. That's the number one job that we have, and that's where all of our attention is. And on your point about do rate adjustments exacerbate existing conditions, you know, Congress was very clear. Price stability and full employment. And we obviously are the full employment looks pretty stable, but obviously missing on the inflation mandate and getting that right. Not that doesn't just help, you know, the upper part of the income distribution.

10:38Kelly Evans: It actually helps the most the second the bottom half of the income distribution. That's where I hear the most hardship. It's not just complaints. It's hardship, hardship because they're on a treadmill of high inflation and rising inflation oftentimes. And paychecks alone can't keep up with that. So I think that's the most important problem we face.

11:00Mary Daly: Mary, just one more question going back to the tech situation. When you look at things and the banks in your area, the financing around tech, are there concerns you have for systemic risk and whether or not, you know, because I personally, look, I don't want anybody to lose money, but I don't want it to lose money and it costs the government something or creates the need for a bailout. What is your assessment of the systemic risk around the financing of what's going on with AI right now?

11:33Kelly Evans: So, you know, Steve, I'll answer the question this way, that anytime something has a lot of enthusiasm behind it and valuations rise, there's always a sense that maybe this could come down. But what we look for when we think about systemic risk is the number of things. We follow this considerably at the Fed. But one of the things we look for is the private sector pricing in the risk that they see. And I think in the last several weeks, you've seen the private sector, the investors saying, well, let's do some more evaluation of this. Let's see if the debt load is sustainable. Let's see if the promises are going to come to fruition in the near term.

12:09Kelly Evans: Are these companies going to be able to generate revenue that supports the cash flow they need to continue to do well? And I think I haven't heard anything about a question of is the actual technology and the actual importance of things like data centers and cloud computing, is that something we're dismissing? I haven't seen anybody talk about that. What people are asking is, do we have the valuations right? Do we have the enthusiasm matched up with the deliverables in a way that supports the continued, not investment, but rapid pace of growth of that? So I think when the private sector does this and does it orderly, that's actually how the economy should work.

12:47Kelly Evans: And so I think that's a thing to back up from. And look, when you step back from the volatility, which I know is painful for people in the middle of it, but ultimately this is the kind of rebalancing that you would hope for if you want an orderly outcome.

13:01Mary Daly: Okay, just give us a call when you get worried about it, Mary. I will do. I will do, Steve. Thanks so much for your time on this and great timing coming on today. Thanks so much.

13:10Kelly Evans: Thank you. I really appreciate it. Anything you want to put a pin in there?

13:13Mary Daly: Well, I'm interested in your thought, this thing with Barry, you've been on this case for a while, that higher interest rates are something that drives inflation.

13:21Kelly Evans: And I'm, I just, you know, you know why we don't have to relitigate this, but you know why, you know why I'm so obsessed because every time I hear someone say we've had six years of high inflation, I get triggered. And the reason is there's, we're talking about two different episodes. There's the COVID episode.

13:37Mary Daly: You go to HR on me. Is that what happens? Yes. I

13:39Kelly Evans: I call HR and I say, I want to fix this narrative.

13:42Mary Daly: Steve is triggering me.

13:43Kelly Evans: You know, inflation, we're showing signs of coming down and staying down in the recent six to 12 months. I'm not talking about the three-tenths wiggle up and down. I'm talking about there's a difference between three and nine, right? The post-COVID episode ending, it was coming down. We knew some of these things. This is why it's so bad to let inflation get bad in the first place. Car insurance prices rose for four years. They're now finally starting to come down. Now when we talk about the cumulative inflation, I feel like we're mingling two different stories together. And I'm not sure the story today is a story that needs rate hikes so much as it needs an economy to keep growing and to keep expanding and to keep creating all of these jobs.

14:20Kelly Evans: So I don't know. I totally obviously may be wrong. I totally get that.

14:24Mary Daly: I appreciate your humility. I appreciate your challenging the edge event. I just can't get my brain around how the Fed is going to control inflation if it's not going to have an effect on aggregate demand through higher rates.

14:39Kelly Evans: Well, if you have a better trick, let me know. And you know, we've talked to Michael Darda over the years. He says this is a nominal GDP boom. This is creating people are in different camps.

14:48Mary Daly: Well, nominal 6 % means you ought to have your Fed funds up near 6%. That's the old rule. I'm sympathetic.

14:54Kelly Evans: It's a rule. I'm sympathetic to that. I am. I am. But, you know, is this an inflationary boom? Maybe. Maybe.

15:01Mary Daly: Anyway, let's get back real quick to Mary Daly, who I think was very interesting. Very cool on the jobs front, not seeing.

15:07Kelly Evans: Look at your screen.

15:08Mary Daly: Oh, there she is. She's still there? Oh, I didn't know that.

15:12Kelly Evans: I didn't know that. Mary, do you. I'm a surprise guest, Steve. I'm a surprise guest. You heard our little tête -à-tête. Do you have a response? You don't have to wait. I know she was still there. I get it. Do you think it's a nominal GDP boom that we're experiencing basically in a nutshell, Mary? You know, Kelly, I'm going to have to be probably on Steve's side here on this, not to take sides. But seriously, Americans feel high inflation. They don't ask, is this a nominal GDP boom? They ask, why is inflation so high? Why, when I go to the grocery store, do things rise repeatedly, not just once, not just the price level's high, but it keeps rising?

15:49Kelly Evans: That is ultimately the job that Congress gave us. And we can't change the rules simply because we don't like the result. Ultimately, I haven't heard people at the bottom half of the income distribution, when I'm out in the communities, when I'm talking to small businesses, no one's asking me why we're raising interest rates. They're asking me why it's taking so long to get inflation down. And that has to be our number one priority. And our interest rate is our tool. That is the tool we have to do the job. By the way, there's some who say your number one priority right now is getting down bond yields, whatever, you know, way, shape and form.

16:25Mary Daly: Since Mary's here, I want to come back. Mary, I just sat through a big presentation at the Shadow Market Committee about targeting the Fed funds rate to nominal GDP. And without having a huge technical discussion, the idea that nominal GDP is running 5%, 6%, what does that tell you about how restrictive the Fed is right now and where the funds rate ought to be?

16:44Kelly Evans: I was surprised you didn't ask me about the restrictiveness of policy. So let me weigh in there. You know, I think if you looked at the calculation that often people use, which is what's the neutral rate of interest in the longer run, then it looks like policy is modestly restrictive. That's just the arithmetic of it. But if you're looking at the economic variables, it doesn't seem like it's as restrictive as that would say. So for me, I think it could be slightly restrictive to neutral. And ultimately, it's why the kind of bias I come in with right now, looking at the information we have and what it means for the forecast, is that we're going to need to adjust policy further exactly when and how.

17:24Kelly Evans: Again, I will wait till I meet with my committee members and we decide that. But it's hard to say that, you know, you usually look at the level of the real interest rate through its works, through how you experience it in the economy. And right now, the experience in the economy seems to be that policy is not as restrictive as we need it to be. Yeah, but if this is an AI-driven inflation, and that's a big if because, you know, I'm not sure. But if this is an AI-driven inflation, basically, Mary, did we just unwind, I don't know, 30 percent of that with the election results Tuesday? day? Well, I think there's a lot of policy uncertainty.

17:57Kelly Evans: And I wouldn't put it just on AI, I would say. And I wouldn't put it just on the election. Look at AI before. There were jitters in those markets before, as people are just investors are just asking, is this really going to deliver in the timeframe? And can we really support the debt burdens in this timeframe? The other thing, though, is there's policy uncertainty about tariffs. We don't know what's going to happen with the war. I think all of those things matter for the outlook for inflation. And And Kelly, you're right about this. And I've heard you say this before, is that, you know, the typical way that macroeconomics would talk about this, monetary policy would think about this, is that you look through shocks like tariffs, oil, even the AI boom.

18:35Kelly Evans: But ultimately, I think we also have to ask ourselves, do shocks that just come one after another, do they compound? And do we have a problem with underlying inflation? So, you know, the thing I would point to is look at services inflation-x housing. That's supposed to be very interest rate sensitive. We're not really seeing that come down in the way we would expect it to. And so we've got to focus on those things. I honestly think the American people deserve to have 2 % inflation, and it's our job to deliver that.

19:04Mary Daly: Mary, it was awesome of you to stick around and come back on, and it's my great pleasure to thank you once again.

19:09Kelly Evans: Thank you, Steve. Thank you, Kelly. It'd be great if she pops up in another 15 minutes.

19:13Mary Daly: I'll do the whole show, but we have to make some money, apparently.

19:17Kelly Evans: Mary, thank you. San Francisco Fed President Mary Daly. As mentioned, great to have a labor economist in particular on a day like today. Steve, thank you. We're not seeing much of a rebound, I'm sorry to say, after yesterday's big losses. As we look at the broader markets, you can see the Dow turned negative just a short while ago. NASDAQ still trying to lead the way, S &P up half a percent. Let's bring in Ron Temple. He's the chief market strategist at Lazard. And Bob Dahl, he's the CEO and chief investment officer at Crossmark Global Investments. It's Give us your take on this economy, these election results and the markets.

19:52Mary Daly: Oh, wow. How many hours do I have? The economy is good. You just saw the employment report this morning. The economy is in good shape. I wish Americans weren't spending so much out of their savings rate as it continues to fall. But for now, that's what we've got. And that's part of why earnings growth has been so strong. And it's earnings that have kept the market up. I mean, think about it. Earnings are up 30 percent. Stocks are up 10 percent. That means PEs are down 20 percent, Kelly. So we've thrown a lot of negative stuff this year, but the earnings have overcome all of it. AI, we're in the next stage of AI.

20:30Mary Daly: The first stage is if it has AI in its name, you better own it because it's going up. Then you get to the period where how are we going to finance this, the whole circular financing question mark, the free cash flow question out of the CapEx. A lot of stocks will do well in AI, but a lot of stocks will do poorly, as is the case when you get to that sort of second phase of any technology. Earnings are the key. If they continue to be 30 percent and surprise of the upside, stocks will be fine. If not, we've got some problems.

21:00Kelly Evans: Well, it's hard to take 30 percent and then keep going, you know. So I see both sides of that argument. Ron, jump in here. And do you have any reaction, Ron, to what we just heard from San Francisco Fed President Mary Daly, who was pretty clear she sees the need for further rate hikes?

21:13Mary Daly: I would say I'm in the same camp with Mary Daly. I mean, I do think my colleagues at Lazard have written about this. We've seen a series of shocks on the supply side that have driven one basically upside in inflation after another. And after five and a half years, I don't want to trigger you. So I said five and a half instead of six. After years of basically exceeding that 2 % target, we clearly have a full employment economy, as we saw this morning at 4.1%. The initiative for the Fed needs to be to raise rates. And the market, I think, is appropriately pricing that at around 80 % probability in December.

21:44Mary Daly: What's interesting to me is the market has taken down the probability of additional rate hikes next year by about half a hike. So effectively, we've taken about 12 basis points out of rate hike expectations by mid-year 2027. And I think part of that is because of what we're seeing in terms of the equity market and the AI story. And in my view, what we've seen this week is a necessary, it's the beginning of a necessary recalibration because we had excessive enthusiasm around the outlook for earnings growth and revenue growth related to AI. As Mary mentioned, and as you and Steve have mentioned, we already had jitters in the market where people were starting to worry about the amount of leverage, which is very high related to AI.

22:24Mary Daly: Worried about the roadmap to get a return on invested capital. And I think the election this week added to those worries. I think the market might be a little excessively worried about the election results and how it affects AI and the data centers, but I think it's just another piece of that recalibration.

22:39Kelly Evans: Because we want to just kind of wrap this up with something actionable for our viewers, Ron. Best idea right now?

22:46Mary Daly: Well, my idea, I think right now, investors should be sitting tight. And over the next days and potentially weeks, I think you're going to get some good buying opportunities. I agree with Bob. We've seen amazing earnings growth. We've derated the market. The U.S. is at less than 18 times forward earnings. The tech sector is actually cheaper than the broader cap-weighted S &P. I think that's becoming more attractive. And I do particularly like non-U.S. markets. Emerging markets is my favorite market right now on a structural basis. And I believe Japan is also an attractive market over the next three to five years, both looking more attractive by the day given what we've seen in the A.I.

23:20Mary Daly: sell-off. Clear and concise answer there. Bob, what about you? I'm going to agree with everything Ron just said. I will underscore the fact that technology is cheaper than the market on a P.E. basis. That's rare. And pick your spots. I don't think it's going to be straight up. Pick the weekdays and do some adding, including in technology.

23:40Kelly Evans: All right. Buying the dips, we call that. Guys, really appreciate it today. Thank you. Bob Dahl and Ron Temple weighing in. Coming up, Oklo having its best day in over a year after a big revenue beat. The shares are up more than 21 percent. They're also snapping a seven-day losing streak and are still lower since Monday. We'll speak exclusively with the CEO about powering the AI build-out next. But first, that build-out is going to require a lot of workers with a lot of trade skills. Is the labor market ready to provide that? We'll ask the CEO of United Technology Institute next.

24:15Mary Daly: This is The Exchange on CNBC.

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25:46Kelly Evans: The jobs report coming in strong this morning, well above the forecast, but the midterm results are raising some questions about the future of the AI buildout. Our next guest understands the skills and workforce needed to keep that build out moving. Joining us now is Jerome Grant. He is the CEO of Universal Technical Institute. Jerome, it's great to see you again.

26:03Mary Daly: Good to see you. Thanks for having me on the show.

26:05Kelly Evans: A couple of different themes I want to get into, but the number one here, we had an electoral union representative on just before the midterms on Monday who was concerned that the results could slow the AI build out. The stock market seems to share those concerns. Do you?

26:19Mary Daly: It could. I mean, as far as we're concerned, prior to the AI build out, data centers, chip manufacturers, etc., the demand for skilled workers in America was still completely out of line. I mean, there were four or five jobs for every graduate prior to that. And so it may it may slow some sectors, but our business isn't really particularly dependent on one sector.

26:44Kelly Evans: Diversified, as people will say about the market. In fact, one of the things you were featured in recently in the Wall Street Journal was that there's an increasing demand. Is it demand for or is it there's a lack of supply? There's a lot more women coming into these roles, which is catching some attention, you know, and it's great. I mean, yeah, I don't know. I don't know if I should be rooting for my daughter to do one thing or another. But some of the people who interviewed who are saying they're making six figures comfortably, these jobs are not necessarily as physically demanding as they might have been, you know, 75 years ago.

27:13Kelly Evans: and they can be pretty steady, great benefits, you know, great provider of income.

27:18Mary Daly: Well, that's that's absolutely the case. And we're thrilled to see more women choosing to come in into the area. You know, five years ago, Universal Technical Institute, which we've got about 30 ,000 students in our 35 campuses around the country, was about eight percent women in or excuse me, about three percent women in the tech in the tech trades. Now we're up to about eight, which means were moving in the right direction. Some areas, as you see on the screen there, like auto finishing is up as high as 19%. It's been a real effort. And really, the issue is that the supply and demand problem being so acute, we're looking for every person possible that may be interested in the trades to bring them in.

28:01Mary Daly: So there's a real focused effort on trying to bring more women into the area.

28:04Kelly Evans: We just mentioned we added 160 ,000 jobs last month, which was way more than expected. I mean, we've often been told the new normal for this slow-growing labor force because of immigration and demographic changes. We only need like 40 or 50 ,000 to break even. We did 160. That's a number from like 10 or 15 years ago. So does that land with you, the idea? Because we always like to fact-check what the stats are saying. They always get adjusted over time. Does that make sense to you based on the demand you're seeing? And we've seen this in the Fed's Beige Book, too, reports about labor shortages.

28:35Kelly Evans: I wasn't sure we were still in that kind of economy. Oh, yeah.

28:40Mary Daly: I mean, and again, in the sector that we that we play, we've been seeing several hundred thousand new jobs being created in, you know, for welders, electricians, for elevator operators, auto workers, et cetera. So it doesn't it doesn't shock me. It doesn't shock me in the least to see that is is that, you know, our business is really about matching skilled workers with that demand.

29:06Kelly Evans: Yep. And as you say, hopefully it will continue. So you don't see it, worry about a big slowdown, even in just those areas where you're most exposed to AI chips?

29:15Mary Daly: No, not at all. I mean, the number of HVAC techs, the number of welders, the number of electricians and auto technicians, the demand continues to grow, especially, you know, with the drop off in the demographic and the number of retirements that there are going to be over the next five to 10 years is, you know, we're really building out as quickly as we can. We're building four new campuses a year around the country trying to trying to build into that demand.

29:43Kelly Evans: Four new campuses a year is really something. Jerome, thanks very much. Appreciate it. Sure. Jerome Graham, CEO of Universal Technical Institute. Coming up, the semiconductors are a big part of today's bounce back with AMD up 8%, Lamb Research and Intel among the leaders. But they're still down big this week. Marvell and Asera are down 30 % since Monday. That's on the bottom right of your screen there. Micron's down 23%. We'll drill down on the chip trade. What to do about it next.

30:16Mary Daly: With the Discover 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.

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31:10Mary Daly: This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast, or find Schwab Market Update wherever you get your podcasts.

31:50Kelly Evans: Dow is fighting to stay positive. Let's get to Brandon Gomez for the CNBC News Update. Brandon.

31:54Mary Daly: Hey there, Kelly. Cornell University's Faculty Senate is finishing a vote on a regulation declaring no confidence in the school's administration. Faculty members question whether university leaders can effectively address sexual assault on campus following outrage over the handling of several allegations. The vote is non-binding and results are expected later today. Meantime, Thomas Markle, the estranged father of Meghan Markle, has been arrested in Florida and charged with possessing child sexual abuse material. Prosecutors say agents seized 78 items containing suspected abuse images, including slides, negatives and books from two California storage units.

32:29Mary Daly: The investigation followed a tip from the Philippines. And Jason Redding Quinones, the U.S. attorney overseeing a sweeping Justice Department probe of President Trump's political foes, has resigned. The Florida-based Grand Conspiracy investigation examines former government officials who investigated Trump and his campaign. Attorney General Todd Blanche announced the departure but gave no reason. DOJ National Security Chief John Eisenberg also resigned. That's your news this hour, Kelly. I'll send things back to you.

32:57Kelly Evans: Brandon, thank you very much. Coming up, an exclusive interview with the CEO of Oklo on the heels of their results and the impact the growing data center pushback could have on their outlook. The shares are up 24 % now. He's back after this.

33:13Kelly Evans: Welcome back. A rough ride for tech amid concerns. This week's blue wave could slow the AI build out. But what if the growing opposition to data centers that helped fuel that backlash is based on inflated numbers? Pippa Stevens is here with that story for today's Tech Check. That's a whopper, Pippa.

33:31Mary Daly: Yeah, Kelly. So this is really the key question here. And put simply, here's how it works. When a developer begins planning for a data center, they have to get in line with utilities in order to get access to the grid. And sometimes companies aren't sure where they will end up building the data center. So they get in lines for multiple locations. And that means some of the power estimates out there are far too high because they're counting the same project several times. It's called phantom load. Now, across the U.S., the data center backlog sits at 1 ,040 gigawatts. That's according to utilities reported pipelines.

34:02Mary Daly: But data from Wood McKenzie shows that only 302 gigawatts of that is actually committed. So less than 30 percent. And nowhere is this a bigger problem than in Texas, where the queue has stretched to 474 gigawatts, 90 percent of which are data centers. To put that number in perspective, it's more than five times the state's all time system peak. That's what led Governor Abbott to institute the pause on new applications. Now, we did hear from Dallas-based power company Vistra this morning with CEO Jim Burke saying, quote, it's different to have one data center somewhere in the area, but if you think 10 are coming to your area, which is what happens with the overstated cues, you get a reaction.

34:42Mary Daly: Now, for the midterm specifically, AK Capital Consulting's Neil Calton telling me Phantom Load wasn't helpful from both an optics or, Kelly, a practical level.

34:51Kelly Evans: Wow, that's a good point. And so maybe does that mean some of this attrition is already factored in or not?

34:58Mary Daly: It's more that some of those inflated forecasts of just how much power we're going to need are not actually based in reality because multiple projects are being counted the same time. And, you know, it could be three or four even times across the U.S. So when you look at the numbers overall, people are like, oh, my gosh, it's going to require all this power. But now utilities are saying we need more evidence. This project is actually going to be built in order to secure your place in line. We need evidence so that we are accounting appropriately and not overbuilding.

35:24Kelly Evans: Great point, Pippa. Thank you, Pippa Stevens. Meantime, shares of Oklo are on pace for their best day since September of last year after reporting a smaller than expected 3Q loss. The nuclear tech and power company says the rise in energy demand is not just from data centers. It's also from manufacturing, utilities and defense. Joining us now exclusively on The Exchange is Oklo CEO Jake DeWitt. Jake, welcome. It's great to have you here.

35:48Mary Daly: Thanks for having me. Excited to be here.

35:50Kelly Evans: So I'm just going to quote Wedbush on this to get our audience and myself up to speed on your company. They say you're the furthest along of any U.S. advanced nuclear developer. You've taken a privately funded, privately sighted reactor from groundbreaking to criticality in under 11 months. Talk about that and how close you are to bringing what I understand this technology still not fully online yet. When might that happen, you know, especially with with all the changes that are going on this week?

36:20Mary Daly: Yeah, I mean, it's an exciting time, even with all the changes moving, because nuclear plays such an important role in the energy mix. And what's great is we're proving it can be done in timelines and cost levels. That actually makes sense. That changed some of the historical paradigms and precedents that the stagnant kind of dynamics of the industry had for a long time. But we're seeing an influx of innovation, of ideas, of new suppliers, of capital that is allowing us to actually build at these kinds of paces. And that was the thing we took on ourselves was let's build with something that we can show works quickly and then show scalability and repeatability.

36:51Mary Daly: We did that in Texas. We're building actively, trying to set, you know, another world record, if you will, in what we're doing in Idaho. And so far it's going really well. And we're learning a lot by doing it. This is the big thing.

37:02Kelly Evans: And Jake, let me just jump in because, again, you know, make sure I'm tracking. Are these projects online and are they actually powering data centers or what have you right now?

37:13Mary Daly: Yeah, not powering data centers yet. We're looking at that happening in 2029 with our first real power coming out. But on the step up, we do a couple of things that are really important for here because you think about power reactors is a really important part. But there's other things that come from that, making fuel, making isotopes. Those are different opportunities that bring in revenue sooner. And that's one of the things we showed in Texas is a reactor that can now start producing isotopes relatively soon. Scale that up to make additional capabilities for more isotope production, bring in revenues, and apply the lessons learned about building and operating a plant to the plant we're building in Idaho called the Aurora, Idaho plant, which will be putting power into the grid and probably supporting some pretty cool data center build-outs from there, as well as building beyond that into Ohio to support Meta with our deal we have with them.

37:56Kelly Evans: Right, and I'm just looking at the quarter. Your revenue, it says, is still about$2 million. Is that right? You've got a billion and a half of cash. Your R &D expense,$41 million. So this is still a very speculative investment, in my words, you know. But meaning, can you talk to us how quickly are we going to go from$2 million in revenue to something orders of magnitude larger than that that would kind of justify the ROI?

38:23Mary Daly: Yeah, well, and I think this is the great thing. We're positioned where we've now shown execution to build. Now it's about turning those assets, continuing that pace of execution, learning, and then turning those assets into revenue generation. And I think one of the things is a lot of the world looks at it as just on the power side, but there's things we're doing that bring in revenue sooner as we're showing bringing in revenue from the capabilities we have in-house for manufacturing and specialty engineering expertise, but also coming up, right? Isotope sales, fuel sales. We need fuel to power these reactors being built, ours and others.

38:50Mary Daly: And we have a really cool platform that we get to build off of that builds off of what you can do on fuel fabrication. We need to make the fuel, but also provide the raw material that goes into fuel, which is what our recycling efforts can do. We announced a project in Tennessee. We're building a pilot scale of that to start. But that throws off revenue from isotope sales. It sails off revenue from the fuel feedstock, which helps fuel the reactors that we're building and others, and then the power sales. So I think over the next two or three years, you're going to see that ramp really start to kick up.

39:13Mary Daly: And it's great. We've been able to capitalize to support our pace of execution. Actually, we have over$3 billion on the balance sheet so far. And it's a great place to be able to be building and learning at scale and then beginning to ramp that those assets into revenue-generating assets and open up opportunities that transcend just the power side, which isn't just just. It's kind of the biggest market there is. But these other things complement that and enhance the revenue story.

39:34Kelly Evans: Right. So where do you think you'll be kind of best case in, let's say, two years' time?

39:40Mary Daly: Well, I think, okay, two years' time will be really fun because we'll have probably turned on an additional isotope production reactor. We'll be working through that side, putting really important life-saving medical isotopes into the market, working through spinning up and expanding that capacity. We'll be on the edge of commissioning our Aurora plant in Idaho and then putting power online there. We'll be executing the ability to, I should say executing, we'll be fabricating fuel and we'll be producing fuel feedstock from a pilot recycling line. That's what we're setting the stage and the milestones to go do.

40:10Mary Daly: And it's an awesome time to be in the nuclear industry because you have so much innovation happening, but you have so much demand for what we're doing. Look, it's clean, right? It's scalable and it can be done at different cost scales and time scales people have thought of before. We're entering a whole new world right now.

40:25Kelly Evans: And it would diversify fuel supplies at a time when that is much needed. Jake, thanks so much. Hope to have you back on soon.

40:33Mary Daly: Yeah, thank you for having me.

40:34Kelly Evans: Jake DeWitt with Oklo. Coming up, where trader Jeff Kilburg is putting his money to work amid the tech sell-off. We'll dive into that. But before we head to break, let's get a quick check on the athleisure space. Under pressure after Under Armour reported a surprise miss on a revenue decline, The company forecasting a drop between 8 % and 9 % for the current quarter. Under Armour shares are down 2 % to 3%. Nike, Lululemon on holdings, slight sell-offs there as well. We'll have more of today's movers when the exchange comes right back.

41:07Kelly Evans: Welcome back. We're watching markets today, which will set the tone for whether we get a nice snapback from yesterday's major sell-off or not. Right now, the Dow is in or not mode. We're down about 19 points. The S &P is up seven-tenths of a percent, so we've climbed a little bit this hour back towards the highs from earlier. And the Nasdaq up 1.4 percent, 1 percent gain for the small caps as well. Jeff Kilberg will join us next to tell us where he was long until back in April. The shares are still up 10 percent since then, but boy, have they had some highs and lows. He snapped up more chips at a discount yesterday.

41:38Kelly Evans: He'll talk for the names he bought next. And speaking of tech at a discount, OpenAI CFO Sarah Fryer weighing in on this week's midterm results, telling Squawk on the street they're staying the course. When I think about the midterms, I need to keep thinking about how do we keep investing to meet that customer demand. It starts early with having built relationships with all of the hyperscalers, and it will continue to mean that we raise capital. We've done it on unprecedented levels, but it also means we're gonna keep building up those relationships with communities so we can get the compute we need.

42:16Kelly Evans: Welcome back. Stocks are coming off their worst day since April of 25. The Dow is flat this hour. The S &P and Nasdaq staying positive. Our next guest put his money to work amid yesterday's losses, buying a handful of tech names, including some of the hardest hit chip stocks. Let's bring in Jeff Kilberg, the founder and portfolio manager of KKM and a CNBC contributor. I was curious, Jeff, about that. Where were you making some moves?

42:40Mary Daly: Well, Kelly, we found the most pain yesterday, but it's interesting to see SOX, the semiconductor ETF. This was the fastest, most rapid 40 % drop we've ever seen. Even back on COVID, yes, COVID, it was down rapidly, but it was only 22 days, but it was only down 33%. So this is the largest 40 % drop in history. So it took 96 days from the June 22nd high to where we were yesterday, but that's with the opportunity yesterday to buy some of the names, Taiwan Semi, NVIDIA, Dell, AMD we added too. So So these are all names that we want to own. And it is remarkable to see this drawdown, this baby being thrown out with the bathwater.

43:16Mary Daly: Truly happened yesterday. I felt those capitulation. I know a lot of people are arguing that we didn't see enough downside volume, but it was enough for us to buy. After we did lighten up in October, went to like a 12.5 % cash position in our ETF, Mango Growth Gary. So we took that opportunity to buy yesterday. And we may be a little bit early. There's more volatility. The VIX isn't over with yet. But we like owning these names because I think the AI compute component is not going away anytime soon.

43:41Kelly Evans: That's why Intel is such an interesting one to talk about because, you know, it's kind of a, I don't know, it's a self-improvement story. The government has a stake. They literally asked Hassett this morning if they would ever consider selling it. Yeah, it's complex. We were talking to Stacey Rasgun about it yesterday. He said the problem is they're still, their manufacturing facilities are over leveraged to building PCs, whereas there's still kind of the server boom, or I think that's what they're called, servers, whatever, that the other infrastructure piece that they should be doing more of.

44:10Kelly Evans: So it's way off the highs. What do you do now? You double down?

44:15Mary Daly: So we own Intel in our Essential Fort ETF. And yes, our methodology, we did not rebalance. We did not trim. Hindsight's 20-20, Kelly. But the methodology that we utilize is being equal weighted. So live by the sword, die by the sword. Of course, everyone's taking profits when it is up 200%. But here we are still up 40%. We own it under$20. If you remember back in 2023, Kelly, that's when we saw Meta up over 200%. So that's our methodology of letting our winners win. But no doubt about it, it isn't great to see Intel down here. But up 8 % today, I think it has the ability. It has to figure out the advanced packaging.

44:51Mary Daly: That external volume really hasn't popped up yet. But we're seeing a lot of promise out there. They're talking to Google, Apple, AMD, Microsoft. So we get excited about owning Intel. And we will rebalance in Q1. but right now we're still owning it.

45:02Kelly Evans: No, I think, look, I'd love to talk more about that one the next go-around because it is an interesting possible entry point if you believe in the story in the very long run, like you're talking about. But let's go to CoreWeave because that's going to be another big test. You bought some yesterday. The shares are slightly higher, I think still in the session today, but we're talking about a 17 % drop since Monday. The earnings are due out after the bell on Tuesday. And analysts are watching the financing plans, pace of new bookings, and just simply whether demand can be sustained. What are your expectations here?

45:33Mary Daly: Well, Kelly, I actually bought this personally over a week ago. I saw it once it broke that$60 mark. It looked like there was support there. Why was I wrong? That was a falling knife, which I tried to catch. So I own it around$55 and quite a ways away. But nonetheless, I am optimistic when you talk about this is the pure play of neoclouds. And what's interesting, what just came out in Microsoft and actually moved the markets lower as we are digesting, what is Microsoft doing? they're consolidating their neoclouds so they're gonna pick winners and losers it's like being on the playground many many years ago you're either getting picked for kickball or you're not getting picked so i think this is going to help facilitate or expedite the neocloud conundrum that we're in as we're seeing all this worry but i think when you look at the backlog i think when you talk about core weaver i think there is an ability for them to move higher but it has just been a jaw

46:21Kelly Evans: dropping move lower right i mean if yeah like we're 45 versus 55 i think a lot of people it's 75 % all time off the highs. So yeah, it's a jaw dropper.

46:30Mary Daly: But if Microsoft picks them, Kelly, that's kind of like being brought up from the freshman B team up to varsity.

46:35Kelly Evans: Or like the seventh grader who makes it to JV or something. That was you. Yeah, no, I wish. I was not. That was probably you and your fam. I guess with CoreWeave, there are credit analysts who are worried they're not going to get their money back. So I think, you know, arguing about whether it's 55 or 45 on the equity, I think that that would all be considered upside based on some of the worst case projections that people are now bracing for.

46:57Mary Daly: They have multi-year visibility, but you're talking about servicing that debt. That is the uncertainty, Kelly. So that's where the question mark comes in. And that's why it's being crushed.

47:04Kelly Evans: All right. Jeff Kilburg, star athlete. And go high race.

47:08Mary Daly: Big game against Miami this weekend.

47:10Kelly Evans: See, I let you sneak that. No. Thank you, Jeff. Really appreciate it.

47:13Mary Daly: Thank you.

47:14Kelly Evans: That's it for us. Thank you for watching The Exchange. I'll join Dom Chu. He's in for Brian on Power Lunch after the spring.

47:47Mary Daly: and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast, or find Schwab Market Update wherever you get your podcasts.