Closing Bell Overtime: Markets Face a Big Week as AI Takes Center Stage 10/26/26

Anthropic

Across the shows: 55 speakers in other episodes, 44 bullish and 39 bearish calls, past 30 days

• Rohit Kulkarni · Burnham Park Capital MarketsBullish

  Anthropic is a once-in-a-generation company, likely the leader in monetizing AI intelligence.

  Kulkarni says the S-1 was a better first step than expected, with three positives. First, profitability trend: gross margin went from deeply negative a year ago to above 50% through Q2, with an 8% operating margin, and he expects 70-75% gross margins to be shown on the IPO roadshow. Second, cash: Anthropic has more than $100B in cash, so it should be able to pay its bills and keep investing over the next 12-18 months despite signing many IOU-style compute deals. Third, enterprise footprint: 12,000 customers paying $100,000 or more per year, a significant footprint in a short time. He sees the company as the leader in turning intelligence into revenue for consumers and enterprises, and believes the IPO gives US capital markets a historic opportunity. He flags risks: sequential growth slowed from July through September, and Chinese models, open-weight models and price competition from OpenAI will not go away. The October annualized run rate is the key number the market will watch.

  “I think this is a once in a generation, if not once in a lifetime company... this is clearly over the last twenty four months, probably the leader in monetizing intelligence and making it available to consumers and enterprises alike.”at 11:18

• Dan Niles · Niles Investment ManagementBullish

  Anthropic's filing looked better than feared: low customer concentration and rising revenue per compute dollar.

  Niles says he liked what he saw in the filing. Top five customers are about 25% of sales, so the customer concentration he had worried about is not a major issue. Every Fortune 10 company uses the product, and 30% of the Fortune 500 have over $100,000 in trailing twelve-month revenue. The chart in the filing shows revenue over compute expense rising from about 0.6 a year ago to about 2.1 in the latest quarter, meaning each dollar of compute generates much more revenue. He sees this as a sign of overall health in the AI trade. The open question is the deceleration: Anthropic grew revenue 145% sequentially in Q2 and that slowed to 45% in Q3, so the annualized run rate will decide the outcome.

  “Yeah. It's all of those things, Mike. In general, I actually liked what I saw. ... Top five customers are 25% of sales. So there's not this massive customer concentration I was worried about.”at 16:51

Meta Platforms

Across the shows: 45 speakers in other episodes, 43 bullish and 21 bearish calls, past 30 days

• Dan Niles · Niles Investment ManagementBearish

  Meta's push to raise capital ahead of rivals signals financing strain and competition for capital, weighing on the stock.

  Niles reads Meta's 8-K as a warning. Meta wanted to get in front of other players raising capital because it worried the market was becoming saturated, and it said competition for that capital is increasing. Meta's stock has fallen about 10% since it reported a great quarter. He had expected the stock to hinge on cash flow, capex, spending and financing needs rather than the quarter itself. He expects the same issues to drive the market's reaction to Google, Microsoft and Amazon, which report this week.

  “Well, I mean, I think there's a lot of competition for capital, and I think Meta is a great example of that. ... they wanted to get out in front of other players that were looking to raise capital because they were worried about the market being, quote, saturated.”at 12:55

Space Exploration Technologies

Across the shows: 33 speakers in other episodes, 26 bullish and 15 bearish calls, past 30 days

• Dan Niles · Niles Investment ManagementBullish

  Musk's SpaceX has a cost-of-capital edge, so heavier AI buildout spending widens its advantage over neoclouds.

  Niles says SpaceX can raise capital at a price-to-sales multiple far higher than any neocloud can. That means the more it spends on building AI capacity, the bigger its advantage, because it can multiply each dollar of revenue by a much larger number. It also has other businesses, SpaceX and Starlink, to help support that spending. This puts it in the same category as Google, Amazon and Microsoft, which have large cash-generating businesses to fund AI spending.

  “And Elon's got a massive cost of capital advantage. Right? Because he can raise capital at a price to sales ratio that is much higher than any of these neo clouds can.”at 14:08

Microsoft

Across the shows: 12 speakers in other episodes, 11 bullish and 0 bearish calls, past 30 days

• Dan Niles · Niles Investment ManagementUncertain

  Microsoft's buyout offer makes him nervous, though he hopes it reflects AI-driven productivity gains.

  Niles says voluntary buyouts always make him nervous. Microsoft did a similar move in January, and the stock did well afterward. He reasons that AI makes employees much more productive, and he hopes the buyouts reflect real efficiency gains. He still worries about data center moratoriums and the slowdown in Anthropic's revenue growth, which could affect the outlook. He says he will have to wait and see.

  “You know, whenever I see that, it always makes me nervous. I mean, the good news is Microsoft had one of these same things, I think, back in January.”at 15:19

JetBlue Airways

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• Phil LeBeau · CNBCBearish

  Jet fuel is JetBlue's key risk; prices staying high into next year would further pressure the airline.

  LeBeau says the Q3 story is jet fuel. Jet fuel rose 57% year over year to $3.91 a gallon and drove a wider-than-expected loss. JetBlue recaptured 87% of the fuel cost through fares, but it expects fuel to average $4.64 a gallon in Q4, up 85%. Although JetBlue has $7.5B of unencumbered assets and still targets at least $1 of EPS in 2028, nobody knows where fuel prices will go. Airline CEOs told him that nobody has confidence fuel will cool off in Q1 or Q2. If fuel stays high in Q2 next year, that would add further pressure on JetBlue.

  “But further out, the big question is gonna be jet fuel. If we're looking at jet fuel at this, let's say in the second quarter of next year... that's gonna put even further pressure on JetBlue.”at 22:58

Moderna

Across the shows: 1 speaker in other episodes, past 30 days

• Geoff Meacham · CitiBearish

  Moderna sold off on sell-the-news; melanoma vaccine data approvable but missed investors' de-risking expectations.

  The Merck–Moderna melanoma cancer vaccine [intismeran] looks approvable, but investors expected results that were unequivocally great and would de-risk the later kidney, bladder and lung cancer trials. The results did not support that, so the stock sold the news, most visibly in Moderna and to a lesser degree in Merck.

  “the new drug, [intismeran], looks approvable, but I think investors are really expecting it to look unequivocally great and to be de risked into looking at kidney cancer and bladder cancer and lung cancer. The results didn't quite support that.”at 38:00

Merck & Co.

• Geoff Meacham · CitiBearish

  Merck faces a sell-the-news reaction; melanoma vaccine data were approvable but did not de-risk later trials.

  Merck's share of the Merck–Moderna melanoma vaccine data looked good and the drug looks approvable. However, investors expected the results to de-risk later kidney, bladder and lung cancer studies, and the results fell short. That produced a sell-the-news move, to a lesser degree in Merck than in Moderna.

  “The results didn't quite support that. And that's why you've seen a little bit of a sell the news phenom, definitely in Moderna and to a lesser degree Merck.”at 38:15

Eli Lilly and Company

Across the shows: 5 speakers in other episodes, 5 bullish and 0 bearish calls, past 30 days

• Geoff Meacham · CitiBullish

  Lilly benefits from Medicare GLP-1 access in Q3 and broader oral and consumer GLP-1 availability next year.

  Medicare patients began getting access to GLP-1s on July 1, which should be a nice tailwind for Lilly's third quarter. Looking to next year, broad global availability of both the oral and broader consumer spending on GLP-1s will also be a tailwind. Lilly does not need to win the oral race to be the winner, since its pipeline and retatrutide, a next-gen GLP-1 with robust efficacy and a possible late-2027 launch, add further upside.

  “July 1 is when Medicare patients started to get access to GLP-1s. So that's obviously going to be a nice tailwind for 3Q.”at 38:47

Gilead Sciences

• Geoff Meacham · CitiBullish

  Gilead's HIV prevention drug and a blood cancer launch should drive good performance into Q3 and next year.

  Gilead has been one of Meacham's favorites for a while. Its HIV prevention drug has done quite well, though the stock's performance this year has been mixed. He thinks it could do quite well in the third quarter. A next-gen blood cancer drug, anito-cel, launches at the end of the year, outside the current Gilead narrative, and he expects two launches in the first half of next year that investors will like.

  “that has done quite well... but, that I think could do quite well for 3Q.”at 39:54

Apple

Across the shows: 10 speakers in other episodes, 2 bullish and 9 bearish calls, past 30 days

• Mackenzie Sigalos · CNBCUncertain

  iPhone Duo demand is strong, but early display failures could become a reputational risk if they scale.

  The iPhone Duo's first full weekend showed strong demand: in-store inventory is essentially sold out across analyst-tracked markets, Bank of America sees roughly 91-day waits across configurations versus four days for the 18 Pro, and Apple is reportedly ramping Duo orders by about 30%. The first durability concern is an inner display problem affecting a small number of units, with failures near the hinge possibly tied to the hinge or how the screen folds around it. Scale is unclear, but if failures widen, it could hurt buyer confidence, existing supply and the ramp, which Apple's earnings call will address.

  “If the problem scales, I think that this is a real concern that it may prove a reputational risk to the iPhone duo.”at 45:49

AI infrastructure & data centers

• Dan Niles · Niles Investment Management

  Neoclouds lack cash-generating base businesses and most will fail when the AI bubble breaks.

  Niles contrasts neoclouds with Google, Amazon and Microsoft. Those companies run cloud businesses for AI but also have large base businesses that throw off cash flow to fund AI spending. Neoclouds do not have that. He also says neoclouds have a higher cost of capital than players like SpaceX, so they cannot keep pace with spending. He says he completely agrees that when the bubble breaks, most neoclouds will go out of business.

  “...but then they also have these massive base businesses that throw off a lot of cash flow that helps fund it, which these neo clouds don't. And, you know, in general, I'm in a complete agreement that when this thing bubble breaks, you're gonna have most of them go out of business.”at 14:52

AI pricing & unit economics

• Dan Niles · Niles Investment Management

  Open-weight models are cutting AI average selling prices sharply, squeezing margins for closed-model providers.

  Niles names open-weight models as a headwind alongside the slowdown in Anthropic's revenue and the data center moratorium news. Open-weight models have cut average selling prices by more than 50% since May, a concrete figure that feeds into how the AI trade's margins will evolve.

  “You're struggling with that and the fact that open weight is in fact dropping average selling prices by over 50% since May.”at 16:15

US rates & the Fed

• Michael Gapen · Morgan Stanley

  Fed will hold this week but signal further hikes, a hawkish hold with about two dissents.

  Gapen agrees with the market that the Fed will hold this week. The Fed will say it did not feel urgency to raise rates again today, while signaling that the policy rate will still go higher, which he calls a hawkish hold. Market tightening is doing some of the Fed's work, and Fed officials may point to tighter financial conditions and volatility, which would sound more dovish. He expects two dissents, down from three in July; the closer to zero, the more dovish the message. He is factoring energy-driven second-round effects into next year's inflation forecast. The economy can handle 75 to 100 basis points of total hikes, but six or seven hikes back to 2023 levels would change the answer.

  “We do agree with the market that the Fed will be on hold. ... we didn't find a lot of urgency to raise rates again today, but you should still expect the policy rate to go higher in the future.”at 24:52