Election Day, Data Center Debate and AI Sector Fallout

CoreWeave

Across the shows: 61 speakers in other episodes, 16 bullish and 60 bearish calls, past 30 days

• Barry Sternlicht · Starwood Capital GroupBearish

  Neocloud financing is too expensive; CoreWeave's 15% bond yields can't fund new data centers, so the AI cycle slows.

  Sternlicht argues the AI build-out will slow because neoclouds such as CoreWeave cannot get affordable access to capital. He cites CoreWeave's bonds yielding about 15% and concludes that no one builds a data center at a 15% yield on cost, so new capacity financing breaks down.

  “The AI cycle is gonna slow because the [neoclouds] can't get access to capital. If CoreWeave's bonds are 15%, how on earth are they gonna build a data center? Nobody is building a data center to a 15% yield on cost.”at 37:13

• Barry Sternlicht · Starwood Capital GroupUncertain

  Some neoclouds may fail, but CoreWeave's existing powered sites grow more valuable as new power gets scarce.

  Sternlicht says the market is signalling that some neoclouds may fail. He argues that operators with energized footprints will hold more valuable assets, because there will be little extra power available. He points to CoreWeave's live capacity, its Microsoft leases expiring in about four years, and a possible acquisition by Microsoft. He also notes CoreWeave has a larger pipeline it probably cannot finance right now, so the view is mixed: failure risk on one side, asset value on the other.

  “some of them will fail. Now they do have existing power, which [is] gonna be all that more valuable because there won't be any extra power.”at 38:42

Apple

Across the shows: 36 speakers in other episodes, 32 bullish and 29 bearish calls, past 30 days

• Mark Newman · BernsteinBullish

  Apple's strong revenue and iPhone guide justify a higher target despite weak gross margin.

  Newman raised his Apple price target after the company reported very strong revenue. Its revenue guide was surprisingly strong even though the base iPhone 18 and iPhone 18 Air launch was delayed to March. iPhone revenue is still trending up, and the company guided to 8.5% midpoint year-over-year revenue growth for the December quarter, which he calls phenomenal given the delayed best-seller. The weak point was gross margin, which was a bit light. He is still optimistic on the long term because of revenue growth.

  “Yeah, so for Apple, last night they reported very strong revenue... iPhone revenue is still trending up, they guided 8.5% in the midpoint revenue growth year on year for the December quarter, which is just phenomenal.”at 4:29

Seagate Technology Holdings

Across the shows: 3 speakers in other episodes, 3 bullish and 0 bearish calls, past 30 days

• Mark Newman · BernsteinBullish

  Seagate is Bernstein's top memory pick: lowest risk, accelerating HDD pricing, and a HAMR cost lead.

  Newman calls Seagate his top pick because it carries significantly lower risk than other memory names. Hard disk drive pricing is accelerating rather than decelerating. Seagate has a significant technology lead in HAMR, the next-generation HDD technology, so its costs fall faster than competitors'. Accelerating prices, faster cost declines and strong volume growth lead to an earnings CAGR well over 100%. The stock trades in the low teens on those earnings.

  “Right now, I still like them. I mean, our top pick is Seagate because for Seagate, it is significantly lower risk than some other memory names... hard disk drive pricing is actually accelerating.”at 5:43

Sandisk

Across the shows: 2 speakers in other episodes, 3 bullish and 0 bearish calls, past 30 days

• Mark Newman · BernsteinBullish

  Newman would buy SanDisk on the sharp dip, betting on memory pricing running ahead of supply.

  Newman is still optimistic on the memory names and says he would be buying SanDisk at this level given the sharp dip. His underlying case is that memory demand is far ahead of supply and component prices keep rising even as the stock has fallen. He calls SanDisk a buy, though he ranks Seagate as the lower-risk choice.

  “I still am optimistic on the memory names too, and I'd be buying Sandisk here given this sharp dip.”at 5:51

Fiserv

• Bill Nygren · Harris Associates (Oakmark Funds)Bullish

  Fiserv rises on hitting quarterly targets and an earlier buyback at about seven times earnings.

  Fiserv hit its quarterly targets and pulled forward its share repurchase by about a quarter relative to what investors expected. Nygren says the stock trades at about seven times earnings, which is enough for it to rise on that news. The market is more forgiving of stocks priced this low than of high-multiple names that miss.

  “Well, it's funny you look at a company like Fiserv and what did they do this morning? They basically hit their targets for the quarter and they pulled forward their share repurchase maybe a quarter sooner than what people were expecting.”at 10:54

General Motors Company

Across the shows: 3 speakers in other episodes, 3 bullish and 0 bearish calls, past 30 days

• Bill Nygren · Harris Associates (Oakmark Funds)Bullish

  GM's aggressive buybacks and six-times P/E make it cheap, with EPS growing even on flat earnings.

  Nygren credits GM's new CFO, Paul Jacobson, with reorienting how free cash flow is used after years of diversifying into businesses where the company had no right to win. GM has cut about 40% of its share base in four years and announced another buyback of more than 25% of the company, expected to be completed in two years. Holders' ownership rises without buying shares. If GM had flat earnings for two or three years, EPS would still rise about 35%. The stock is expected to earn about $15 next year and sells for under $90, or about six times earnings.

  “They've been buying back stock aggressively. In the past four years, they've taken out about 40% of the share base... the stock, it's supposed to earn about $15 next year, sells for less than $90 a share.”at 12:31

Verizon Communications

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

• Andrew Yang · Noble MobileBearish

  Verizon's $18B dividend will get harder to pay as cheaper wireless rivals drive prices down.

  Yang runs Noble Mobile, a wireless rival. Americans pay about $83 a month for wireless, versus about $35 in Europe, a gap he puts at roughly $100 billion a year in extra spend. Prices are coming down as Elon Musk's and his own operations push them lower. Yang thinks it will get tougher for Verizon and AT&T to keep paying about $18 billion a year in dividends, which he says is the only reason people hold their stock. He says these companies are returning cash to shareholders rather than showing growth, and that consumers will increasingly question paying over $100 a month for what has become a commodity.

  “I think that it's going to be tougher and tougher for Verizon and AT and T in particular to be paying out, let's call it, $18,000,000,000 a year in dividends, which is the only reason why anyone holds their stock.”at 26:10

AT&T

Across the shows: 2 speakers in other episodes, 1 bullish and 1 bearish calls, past 30 days

• Andrew Yang · Noble MobileBearish

  AT&T's dividend payouts will get tougher as cheaper wireless rivals push prices down.

  Yang runs Noble Mobile, a wireless rival. He argues that US wireless spending is far above European levels, which he quantifies at about $100 billion a year. He expects prices to fall as new entrants push them lower. He says it will be tougher for AT&T in particular to keep paying the roughly $18 billion a year in dividends that holders depend on. He describes the company as returning cash rather than growing, and says consumers are increasingly questioning why they pay over $100 a month for a commodity.

  “I think that it's going to be tougher and tougher for Verizon and AT and T in particular to be paying out, let's call it, $18,000,000,000 a year in dividends, which is the only reason why anyone holds their stock.”at 26:10

Oracle

Across the shows: 28 speakers in other episodes, 6 bullish and 25 bearish calls, past 30 days

• Barry Sternlicht · Starwood Capital GroupBearish

  Oracle is on the edge, and its backlog depends heavily on OpenAI, so it is at risk.

  Sternlicht says Oracle is hovering on the edge in credit terms, while other credits look good. He is worried about Oracle. A large part of its backlog comes from OpenAI, and OpenAI is committed to a lot of power. As goes OpenAI, so goes Oracle, so the company's revenue depends heavily on one customer's ability to pay.

  “Other than Oracle, which is hovering on the edge... I think I'm worried about Oracle... Oracle's revenue comes from... A lot of it in the backlog is from OpenAI. And as goes OpenAI, Oracle.”at 36:31

AI infrastructure & data centers

• Libby Cantrill · PIMCO

  Data center backlash is real and will bring state-level restrictions that slow AI capex growth.

  Cantrell disagrees with the view that data center opposition is election-year rhetoric. Voters are distressed about data centers, worried about affordability and suspicious of big tech, and that is turning into a data center backlash. Federal restrictions are unlikely because President Trump would not sign them, so the risk sits at the state and municipal level. Ohio is ground zero, with both gubernatorial candidates advocating a statewide moratorium. Georgia has a lot of planned compute that would be vulnerable to a moratorium. Growth estimates for next year assume a hockey-stick in capex growth. She expects not zero build-out but more friction at the local and state level, which could slow growth.

  “What we've been telling clients is that there is this kind of conventional wisdom that this is just election year rhetoric. We would push back against that. This has, we think a lot of legs.”at 17:33

• Barry Sternlicht · Starwood Capital Group

  Data center moratoriums will delay AI spending 9 to 24 months, leaving excess equipment on the market.

  Sternlicht says moratoriums popping up across the country will push data center projects out nine, twelve or twenty-four months. That will make spending slow, since the discount rate and the market's expectations adjust. Equipment takes about three years to arrive, so developers have already placed orders and paid deposits. If projects are blocked, equipment could return to the market, contracts could default, or equipment could be sold or shipped to Asia and Europe. Starwood is a big data center player globally, and he says demand could shift to its facilities in Ireland, Milan, Japan, Malaysia and Australia. He also argues that the industry narrative has done a poor job, that some of its projects need no water, and that consumer rates can stay flat.

  “I do think it's gonna slow, though... If you just push the stuff out nine months, twelve months, twenty four months, the discount rate, the market... The spending has to slow.”at 35:40

• Barry Sternlicht · Starwood Capital Group

  Governors want to study data centers; developers must prove they won't raise consumer rates or harm the environment.

  Sternlicht says most governors say they will host data centers but first want to study them. He argues developers will have to prove they won't increase consumer electricity rates, won't destroy the environment, and will be responsible neighbours. He adds that data centers should be quiet and sited away from homes, and that markets will sort it out.

  “Most of these governors are saying they will have data centers. They just wanna study them. And I think we'll all have to prove that we don't increase consumer rate,”at 37:41

AI & jobs

• Andrew Yang · Noble Mobile

  AI is already driving job losses and grad underemployment, not just the post-COVID hangover.

  Yang argues the jobs conversation is driven by AI completely. Microsoft is offering to buy out 60,000 workers, more than a quarter of its global workforce, and American Express reported rising profits while still cutting about 4,000 jobs. Both companies partly attributed the cuts to AI. Computer science has gone from the top college major to students heading the other way. Almost half of recent college graduates are underemployed. Parents are advising kids toward vocational school. He adds that school loans, once considered good debt, may become bad debt, which he calls an AI story.

  “Oh, this particular conversation is being driven by AI completely. I mean, you have computer science going from the number one major of the country to now kids running the other direction.”at 24:52

• Barry Sternlicht · Starwood Capital Group

  AI's job disruption will hit in about a decade, not a century, so government must retrain workers now.

  Sternlicht argues the AI transition will be much faster than past technology shifts. He compares the industrial revolution, which took about a hundred years, with an AI revolution that might take about ten. He cites Microsoft offering buyouts to 25% of its workforce as an early sign. He says both blue-collar and white-collar roles will change, workers are not trained for the new jobs, and government needs to fund retraining.

  “the industrial revolution took a hundred years to take place. This AI revolution might take ten,”at 39:34

US housing

• Barry Sternlicht · Starwood Capital Group

  Rate hikes will shrink housing supply, pushing rents and home prices up and feeding future inflation.

  Sternlicht says rate increases will definitely hurt the housing market and property markets. That reduces supply and creates a housing shortage. Rents and home prices will then rise, and because housing is about one third of CPI, the effect will feed future inflation. He says the policy is therefore doing the opposite of what the Fed wants, creating a housing crisis and reducing future growth.

  “It'll definitely hurt the housing market. It'll definitely hurt the property markets... rents will go up and home prices will go up. And that is one third of CPI.”at 31:59

• Barry Sternlicht · Starwood Capital Group

  Regulation makes affordable housing far costlier to build; the system is broken and needs overhaul.

  Sternlicht says building affordable housing is brutally hard because of regulation. He gives a Tucson example: an affordable project costs about $400,000 a unit, and the same building at market rate would cost much less. The transcript's market-rate figure is garbled as $2.50. He calls the system broken and calls for streamlined approvals and incentives such as the Florida and Texas tax break for converting market-rate units to affordable.

  “We're building in Tucson at 400,000 a unit, an affordable project. If I was gonna build it market rate, it cost me $2.50.”at 42:23

US growth & recession risk

• Barry Sternlicht · Starwood Capital Group

  The economy is booming narrowly on AI and tech spend while consumer confidence is wildly low.

  Sternlicht says consumer confidence is wildly low, which does not square with talk of a booming economy. The boom is narrow and concentrated in IT and AI and tech spending. Many people think data centers will only enrich the rich while they lose their jobs. He ties the political divide and the mood to this narrow growth. The argument is qualitative and is not backed by hard data in the transcript.

  “Consumer confidence is wildly low... The economy is booming narrowly. It's booming in IT... AI and tech spend.”at 33:09

• Barry Sternlicht · Starwood Capital Group

  The AI boom powers US GDP, so an AI slowdown will drive a broader economic slowdown.

  Sternlicht argues the AI boom has been the main engine of US GDP growth. He expects the economy to slow because the AI build-out will slow, not because of interest rates. He frames the AI slowdown as the mechanism that pulls down GDP.

  “the AI boom, and the slowdown in GDP will come from the AI slowdown.”at 37:41

AI chips & semiconductors

• Mark Newman · Bernstein

  Memory stock selloff is a panic; AI capex won't glut memory, and DRAM, NAND and HDD pricing keeps rising.

  Newman argues the market is panicking that the AI bubble is about to burst and that AI capex will decline sharply, leaving a memory glut. He says there is no evidence of that. Compute remains very tight and demand stays very strong, so demand for memory, DRAM, NAND flash and hard disk drives is far ahead of supply. Prices for these components keep rising even though the share prices have fallen recently, so he thinks the market has the situation wrong.

  “Clearly, the market is panicking that the AI bubble is about to burst. We don't really see any evidence of that... Demand remains very, very strong. Compute remains very, very tight... pricing for all these components continues to go up despite the share prices recently going down.”at 3:22

US stock market outlook

• Bill Nygren · Harris Associates (Oakmark Funds)

  Cheap financials, energy, healthcare and industrials beat AI names; buybacks drive EPS growth.

  Nygren says Oakmark has been positioned away from the AI trade because the team has no conviction on those names, and when it lacks conviction it stays away. The rest of the market, including financials, energy, healthcare, industrials and consumer products, sells at barely double-digit P/E multiples, and many trade at single digits. He contrasts this with the risk that Paul Singer and Jeremy Grantham flag in AI stocks. These cheap companies are large buyers of their own shares, and that supplements relatively slow earnings growth to produce decent EPS growth.

  “And where that has left us is the rest of the market... It's financials, it's energy, it's healthcare, industrial companies, consumer products. And a lot of those are selling at barely double digit PE multiples. And in fact, a lot of them at single digit multiples.”at 9:46

AI bubble & tech valuations

• Bill Nygren · Harris Associates (Oakmark Funds)

  High-P/E AI stocks collapse double digits on target-meeting results; single-digit P/E stocks are forgiven.

  Nygren argues that high-multiple names are fragile. Companies trading at P/Es in the 30s or higher can hit their targets and still see their stocks collapse by double digits. A stock at about seven times earnings, like Fiserv, can rise on a solid quarter because the market is far more forgiving of single-digit P/E stocks. He says the risk he has in mind is different from the world of cheap, buyback-heavy companies.

  “When you sell at like seven times earnings, that's enough to make the stock go up. And I'd contrast that to the companies that are selling at PEs in the 30s or north of there. And we've seen them hit targets and then their stocks collapsed double digit percentages.”at 11:09

AI regulation & safety

• Andrew Yang · Noble Mobile

  AI should be taxed so the public benefits, citing Anthropic's CEO as support for the idea.

  Yang says he thinks AI should be taxed, and he claims that is not just his view. He cites Anthropic CEO Dario Amodei saying that as the company does more with AI, there should be a way for the public to benefit. He calls for a grand compromise with a sensible approach to taxation so Americans feel the benefits in their own lives, balanced against concerns about data centers and white-collar work.

  “We a 100% should, and that's not just me speaking. That's Dario Amade, the CEO of Anthropic, saying, look. We're doing more and more with AI. We should have a way for the public to benefit.”at 22:52

US rates & the Fed

• Barry Sternlicht · Starwood Capital Group

  Fed rate hikes are the wrong medicine: they won't slow AI spend or the economy, and they will hurt housing.

  Sternlicht argues that Kevin Warsh is using rate increases to slow the economy, and that this is the wrong tool. Rate hikes won't reopen the Strait of Hormuz or slow AI spending, which is driving GDP growth. Slowing will come from credit markets and data center moratoriums, not from the Fed. He notes that about 5.2 million jobs were added since the 500 basis point hikes began in May 2022, mostly in services like education, health care and government. Hikes could hurt manufacturing and definitely hurt housing and property markets, which creates a shortage and pushes up rents and home prices later.

  “I mean, Kevin is using one tool interest rates and trying to raise rates to slow the economy. I have to say, if you want me to be controversial, I would say it's the wrong medicine for this economy.”at 30:56

US deficit & government debt

• Barry Sternlicht · Starwood Capital Group

  Higher rates raise the federal interest bill on an already rising deficit without curbing spending.

  Sternlicht argues that raising rates will not change government spending of about $7.6 trillion, which he says is being spent hand over fist. Foreign buyers are not being encouraged to buy US debt, and the country has too much supply because it has upset much of the world. The government has the largest interest bill, so each rate hike makes its interest expense on an ever-rising deficit larger.

  “The government is spending money hand over fist. It's not gonna encourage foreign buyers of our debt... So if you keep raising rates, you're impacting the federal government's biggest victim.”at 32:29