Is the AI Trade in Trouble? 11/5/26

Qualcomm

Across the shows: 4 speakers in other episodes, 3 bullish and 2 bearish calls, past 30 days

• Malcolm Ethridge · Capital Area Planning GroupBullish

  Qualcomm is undervalued: non-handset growth is accelerating while the market still anchors to handset decline.

  Malcolm bought Qualcomm after the selloff. Analysts anchor to a 26% handset decline, but Qualcomm guides to 60% growth in non-handset revenue over the next year. Automotive grew about 89% year over year in the quarter just reported. He says handsets are falling while the rest of the business rises, and that it's a show-me story. The stock is down about 20% in the last month and 40% from its 52-week highs, so he sees a chance to start a position.

  “the analyst community is anchoring to that 26% decline in handset growth... but they're also guiding for 60% growth over this... Over the next year in non handset revenue.”at 33:09

• Sarat Sethi · Douglas C. Lane & AssociatesBullish

  Qualcomm is cheap at 12.5 times forward earnings, with a strong balance sheet, dividend and diversified earnings.

  Sarat says Qualcomm trades at 12.5 times forward earnings, with a great balance sheet and a dividend. Apple is out of the picture, so the company no longer depends on that partnership. Automotive, connected devices and other semiconductor growth diversify its earnings beyond data centers. He sees the selloff in semiconductors as an opportunity to buy a company with real earnings, but says it may take patience.

  “It's trading at 12 and a half times earnings, forward earnings... It's got a dividend... Apple is out of the picture... the opportunity to buy something like a Qualcomm today that has real earnings and diversified earnings base.”at 34:29

• Josh Brown · Ritholtz Wealth ManagementUncertain

  Qualcomm's pivot away from handsets is hard, but UPS's comeback shows a dependent business can reinvent itself.

  Josh says it is very hard to make the pivot Qualcomm is attempting. He uses UPS as an example: after relying on Amazon for unit growth for a decade, UPS weaned itself off Amazon, reinvented its business toward high-end and international deliveries, and the stock has recovered after a few years. He suggests Qualcomm might need patience and could pull it off, but the outcome is uncertain.

  “It's very hard to make this pivot that Qualcomm's trying to make, but there are examples of it working.”at 35:16

Microsoft

Across the shows: 40 speakers in other episodes, 47 bullish and 8 bearish calls, past 30 days

• Rob Sechan · NewEdge WealthBullish

  Microsoft's Azure growth shows compute demand exceeds supply; the company is capacity constrained, not demand constrained.

  Azure is growing 48% and Microsoft is capacity constrained rather than demand constrained. Rob uses this to argue that AI demand is intact and that the selloff reflects build-out timing, not final demand. Hyperscalers with existing compute are better positioned as new capacity gets harder to build.

  “Microsoft's Azure is growing at 48%. They're capacity constrained, not demand constrained.”at 5:43

• Malcolm Ethridge · Capital Area Planning GroupUncertain

  Political pressure gives hyperscalers like Microsoft a window to walk back AI capex commitments.

  Malcolm notes Microsoft has said it won't go free cash flow positive, and reports say Amy Hood was not a fan of aggressive AI spending. He argues that the midterm backdrop gives hyperscalers an opportunity to reduce their CapEx commitments and expectations. If they do, they won't need as much debt financing. He sees canceled projects as evidence that this is already happening.

  “Now's the opportunity for those hyperscalers to say, you know what? ... we think maybe we ought to walk back with those commitments on what those expectations are. This is the window to do it.”at 13:15

Space Exploration Technologies

Across the shows: 48 speakers in other episodes, 70 bullish and 23 bearish calls, past 30 days

• Rob Sechan · NewEdge WealthBullish

  SpaceX's selloff is political, not business-driven; its unique assets justify owning some.

  Rob says the sell-off is a political and Washington story. The largest customer is the US government, which has huge contracts that need renewal. Elon Musk's political support means the company may be in the crosshairs for a while, so real price discovery is happening. The valuation has reset from 93 times sales to 53, and it's hard to call it cheap. He still sees unique assets and monopoly characteristics that the world may need more of, so he thinks investors should hold some. His firm invested early and has been selling as the staged lockup unwinds.

  “This is not a business story. This is a political story. This is a Washington story.”at 43:26

• Rob Sechan · NewEdge WealthBearish

  Heavy year-end tax-loss selling in SpaceX is likely, so timing purchases carefully matters.

  Many investors bought SpaceX at the IPO and chased it higher. With the stock now down, Rob expects huge tax-loss selling in a year that otherwise has little of it. He says investors should be mindful of timing as they head into year-end, so they don't walk in front of that selling pressure.

  “I think because a lot of people bought this on the IPO and chased it up, there's gonna be huge tax loss selling in a year where there's not a lot of that.”at 45:35

CoreWeave

Across the shows: 82 speakers in other episodes, 23 bullish and 88 bearish calls, past 30 days

• Rob Sechan · NewEdge WealthBearish

  CoreWeave and other neoclouds without political connections or easy capital access will suffer more in the AI pullback.

  CoreWeave has hit a new low in the last few days. Rob argues that companies without political connectivity or easy access to capital markets will be hit harder by the build-out slowdown. Suppliers into the ecosystem also face changes to their earnings trajectories, while the strongest players with access to capital keep their advantage.

  “Think about Core Weave and what it's been hit the last few days. New low... those that don't have the same political connectivity, they don't have the access to capital markets, are going to suffer more.”at 6:50

Meta Platforms

Across the shows: 70 speakers in other episodes, 75 bullish and 36 bearish calls, past 30 days

• Rob Sechan · NewEdge WealthBullish

  Meta's AI financing is sound and not built on fragile foundations, unlike weaker borrowers.

  Rob says the financing of the AI build-out is built on pillars of sand for some companies but not all. He cites Meta's bond sale: it sought $9 billion and drew $53 billion of demand, and Meta is sitting on cash. He contrasts this with a levered private equity firm trading at about one times free cash flow.

  “Look at Meta's financing. They went out to raise $9,000,000,000 and had $53,000,000,000 of demand. They're sitting on cash.”at 11:49

NVIDIA

Across the shows: 74 speakers in other episodes, 68 bullish and 27 bearish calls, past 30 days

• Josh Brown · Ritholtz Wealth ManagementBearish

  Nvidia's low forward multiple reflects a market that never believed its 2028-29 earnings estimates.

  Nvidia trades at about 14 times forward earnings. Josh argues this is because the market never believed the 2028 and 2029 estimates, which he says are best-case scenarios at most. SanDisk trading at 3.5 times earnings is further evidence. He concludes that the AI trade's numbers are not realistic, and that expectations are being reset through multiple compression.

  “That's why Nvidia is selling at 14 times forward. If anybody thought that their '28 and '29 estimates were anything other than, like, a best best best case scenario, that stock would at a minimum sell at a market multiple.”at 12:16

Anthropic

Across the shows: 104 speakers in other episodes, 130 bullish and 87 bearish calls, past 30 days

• Kate Rooney · CNBCUncertain

  Anthropic faces a tough IPO given tech discounts, with a lower price range likely; a low price is the bull case.

  Kate says the IPO is a test of a new asset class, going to market while tech is being punished. Investors who once talked about a $2 trillion valuation now expect the lower end of the range. Public-company forecasting is also hard amid the uncertainty around data centers and Congress. She says a low price is the bull case, since it leaves more upside.

  “Anthropic is the dawn of a new asset class, and they're going out to the market at a time when... tech is getting punished, and it's gonna be tough for them... the bull case is if they price low.”at 25:50

MSCI

• Josh Brown · Ritholtz Wealth ManagementBullish

  MSCI can keep rising for years as AI agents and models need the unique datasets it sells.

  MSCI sold off in the software selloff because the market wrongly concluded that data was worthless, as well as software. The business has since had an unbelievable run and reported an incredible quarter on October 20. Josh says AI agents are lapping up the data MSCI sells, and the company also earns strength from selling index licenses to ETF providers. He says it's a bull market for what MSCI does, though the stock isn't a buy at any price. He expects the stock to keep moving for years as AI increasingly requires datasets only MSCI can provide.

  “I could see this thing continuing to move for years to come as AI increasingly requires the type of unique datasets that only MSCI can provide.”at 40:39

Medline Industries, LP

• Sarat Sethi · Douglas C. Lane & AssociatesBullish

  Medline is buying-worthy: it's the Amazon of medical supplies with long growth runway.

  Sarat is adding to Medline, which he calls the Amazon of medical supplies because it sells across the board to many different companies. He cites 10% organic growth and 30% margins. He says the company has a lot of runway left, which is why he is moving within healthcare into Medline.

  “which is the Amazon of medical supplies... It's growing 10% organic growth, 30% margins. We think this company's got a lot of runway to go”at 48:07

UnitedHealth Group

Across the shows: 5 speakers in other episodes, 5 bullish and 1 bearish calls, past 30 days

• Sarat Sethi · Douglas C. Lane & AssociatesBearish

  Selling UnitedHealth after a 20%-plus gain because its remaining upside is limited.

  UnitedHealth is up over 20% for the year, and Sarat says the fund did very well with it. He thinks the upside from here is more limited, so he is selling and moving within healthcare into Medline instead.

  “we're selling UnitedHealth, which is up over 20% for the year... I think, you know, the upside there is more limited.”at 48:07

American Express Company

Across the shows: 6 speakers in other episodes, 2 bullish and 3 bearish calls, past 30 days

• Malcolm Ethridge · Capital Area Planning GroupBearish

  Exiting American Express because its consumer exposure is risky now, despite a solid quarter.

  Malcolm bought American Express on April 2 at $2.95, believing the market was discounting its push toward higher-income consumers. Card member spending rose 8% and revenue rose 9% last quarter, and the company beat earnings. The market still sold the shares off. Malcolm says he doesn't want exposure to anything tied to the consumer at this moment. He thinks the upside story has peaked, so he is exiting.

  “I do not want to be tied to anything related to the consumer, especially at a moment like this.”at 48:45

Shake Shack

• Josh Brown · Ritholtz Wealth ManagementBullish

  Shake Shack's quarter was strong: revenue growth and positive comps, despite the sell-off.

  Josh calls it a very good report and a really good quarter. Revenue rose 15.2% year over year to $423 million, which he says is very good for the category. Same-Shack sales rose 2.5%, the 23rd straight quarter of positive comps, which he says signals more people coming in, better pricing, or both. Guidance was good too. The stock is still falling on the day because of the calendar, not the results.

  “I will say q three revenue up 15.2% year over year is very good for the category.”at 50:02

AI infrastructure & data centers

• Rob Sechan · NewEdge Wealth

  Politics and build-out delays make existing compute more valuable; the AI build-out is a timing issue, not a demand problem.

  Rob argues that nobody voted to make compute less scarce. The midterm backlash and Meta's president's comments make new data center capacity harder to build. When new capacity gets harder to build, existing capacity becomes more valuable. He calls the issue timing rather than final demand, and says the strongest players will survive while higher-leverage builders face a higher cost of capital and compression in earnings.

  “Nobody voted to make compute less scarce... when new capacity gets harder to build, existing capacity becomes more valuable.”at 5:43

• Malcolm Ethridge · Capital Area Planning Group

  Market and GDP growth now depend on a few hyperscaler AI spending commitments, so a pullback would hit earnings broadly.

  Malcolm argues that about 40% of the S&P 500 is mega-cap tech, so the rest of the market cannot do well if tech stumbles. He estimates that about 75% of this year's GDP growth comes from hyperscaler spending. That spending was encouraged by the compute promises from OpenAI and Anthropic. If it deteriorates, the earnings growth expected this year and next is tied to Nvidia, Broadcom and Micron.

  “40% of the S and P is related to these mega cap tech companies. So it's impossible for anything else to do well... About 75 is estimated to be attributable to the spending of the hyperscalers.”at 8:35

• Kate Rooney · CNBC

  The Democratic midterm sweep and data center backlash are bad news for AI labs that rely on growing compute.

  Kate says the Democratic sweep of both chambers of Congress, plus a Democrat winning the Texas governorship, puts a spotlight on the data center backlash. That is not great for AI labs that rely on growing compute and overall capacity to grow revenue. OpenAI's new policy commitments to communities look like damage control after the midterms, which she sees as another sign of the pressure.

  “the midterms especially really did put a spotlight on this entire data center backlash... It's not great news for the AI labs that are really relying on growing their compute.”at 22:18

US stock market outlook

• Sarat Sethi · Douglas C. Lane & Associates

  Semis' index weight is falling from its peak, and the growth money that chased it is unlikely to return.

  Sarat says semiconductors peaked at about 20% of the S&P 500 and were about 16% last week, probably 12-14% now. The largest weight ever was about 8% in 2000. He argues that a lot of money followed the fast growth in semis, and that growth is probably not coming back. He sees the rotation starting four to six weeks ago, with the equal-weighted S&P outperforming in October.

  “they peaked at 20% of the S&P. They were 16% really as of last week. They're probably down to 12 or 14 now... you had a lot of money following really fast and growth that is probably not gonna be there.”at 10:39

• Sarat Sethi · Douglas C. Lane & Associates

  Health care and other defensive sectors with organic growth and cash flow are where opportunities are growing.

  Sarat says his portfolio is 18% in health care, and that defensive sectors have done well in recent weeks. He argues the opportunities in these areas will grow, especially as investors focus on companies with organic growth and cash flow. Health care also had a three-standard-deviation move compared with the rest of the market, which he cites as part of the rotation.

  “we're 18% in health care right now. So if you look at some of our defensive sectors have been doing really well for the last few weeks... the opportunities there are gonna get even more.”at 18:38

Market sentiment, positioning & volatility

• Josh Brown · Ritholtz Wealth Management

  The AI hardware selloff reflects hot money and leverage that built up in AI chips and then deteriorated.

  Josh argues the selloff is about where hot money and leverage sat. Levered pod shops and retail traders have been chasing AI hardware bets. Most of these stocks peaked in July, and investors who held on or doubled down with more leverage now face forced selling by others. He says the worst performers are AI hardware and infrastructure plays, while Berkshire and energy names held up.

  “It's a function of that's where a lot of hot money was, and that's more importantly where the leverage has been... They're chasing the AI hardware bets.”at 2:45

US Treasuries & yields

• Josh Brown · Ritholtz Wealth Management

  Slower AI debt issuance could push Treasury yields lower and reduce the need for rate hikes.

  Josh argues that if AI-related bonds come to market less often, Treasuries get bid up and rates fall. If the pace of the build-out stalls, that lowers inflation and the need for further rate hikes. He calls this a potentially virtuous outcome, even though it comes with carnage in some parts of the stock market.

  “less AI related bonds coming to market, pushing up treasuries, pushing up interest rates. You get a virtuous outcome.”at 14:40

Software & SaaS

• Sarat Sethi · Douglas C. Lane & Associates

  SaaS stocks sold off on fears that AI compute would replace them, and are now recovering as that fear fades.

  Sarat argues that SaaS stocks were being written off because of the fear that the compute build-out would take their business. That fear is not playing out, and software stocks that were considered dead have reacted positively in the last couple of weeks and on Tuesday. He sees this as part of a broader rotation rather than a sign that the market is strong.

  “the SaaS stocks that were getting killed because all the compute that was gonna come out. Well, guess what? That's not gonna happen as well.”at 21:16

Frontier AI labs & model race

• Kate Rooney · CNBC

  The gap between AI labs and big tech could narrow, since big tech already has data centers to retrofit.

  Kate says there is a theory that the gap between the AI labs, which have led in AI, and big tech companies could narrow. Big tech companies already have data centers on the ground and can more easily retrofit some of these existing sites. She sees this as one threat to the AI labs' position.

  “The big tech companies you guys have been talking about, they are the ones that already have data centers on the ground. They can more easily retrofit some of these existing sites.”at 23:44

AI regulation & safety

• Josh Brown · Ritholtz Wealth Management

  Hearings and real AI regulation on model transparency and data centers would not help AI companies.

  Josh contrasts Elon Musk's full political backing for Republicans with Dario Amodei and Sam Altman. He says that distinction may not matter. If lawmakers hold hearings and craft real regulation on AI, including transparency of models and data centers, it won't help any of the AI companies. The argument is conditional and speculative.

  “If if if they decide they wanna hold hearings and craft real regulation around AI and transparency of the models and data centers. It ain't gonna help any of them.”at 44:50