Midterm Market Rally, Texas Data Center Fallout & Crypto Regulation

Caterpillar

Across the shows: 7 speakers in other episodes, 4 bullish and 6 bearish calls, past 30 days

• Jay Woods · Freedom Capital MarketsBullish

  Caterpillar is a stock on sale after the data center selloff; he will buy more.

  Woods says Caterpillar's dip after the Texas data center news makes it a stock on sale. He expects it to be worth more in six to twelve months. It is a core holding in his personal portfolio and he expects to add to it after this drop. His case rests on the price drop, not on new fundamentals.

  “Oh, Caterpillar without a doubt. If we bought this and back it out and you look back six months, twelve months from now, this is a stock on sale that is worth putting in. It's a core holding in my own personal portfolio.”at 6:20

Amazon.com

Across the shows: 41 speakers in other episodes, 53 bullish and 10 bearish calls, past 30 days

• Jay Woods · Freedom Capital MarketsBullish

  Amazon's free cash flow concern eases as data center spending slows, boosting its bottom line.

  The market had worried about Amazon's free cash flow because of heavy data center build spending. Woods argues that Amazon will not be spending much cash on data center builds over the next few quarters, so its bottom line should improve. He urges investors to get back into the stock.

  “Amazon, get back in this name. We were worried about free cash flow. Well, they're not going to be spending a lot of cash immediately over the next few quarters on these data center builds. So this is going to be good for their bottom line.”at 8:45

Bitcoin

Across the shows: 26 speakers in other episodes, 18 bullish and 13 bearish calls, past 30 days

• Matthew Sigel · VanEckBullish

  Bullish on Bitcoin: regulation now settled and the four-year cycle points to a bottom around October.

  Siegel says Bitcoin is one of the few things unlikely to change over the next four years because its regulation is already set. Custody is regulated through ETFs and leverage is regulated via CME futures and MicroStrategy's balance sheet, unlike the last unregulated cycle. Adoption keeps progressing, with Bhutan becoming the third country to put Bitcoin on its central bank balance sheet. He describes Bitcoin as a cyclical asset on a predictable four-year pattern, which implies a bottom in October. He argues Democrats are fine for Bitcoin because there is no real regulatory uncertainty facing it.

  “So we're actually quite bullish on Bitcoin here. And if you think about what's likely to not change over the next four years, Bitcoin stands out. All the regulation is set.”at 38:51

NVIDIA

Across the shows: 71 speakers in other episodes, 67 bullish and 24 bearish calls, past 30 days

• Chris Grisanti · MAI Capital ManagementBearish

  Lightening up Nvidia; picks-and-shovels trade is late-cycle and needs a lower price to buy.

  Crisanti says his firm is lightening up on Nvidia and would need the stock to fall further before it becomes interesting again. His reason is that the picks-and-shovels trade, which includes the chip suppliers, is in the seventh or eighth inning of its run. By contrast, the power trade is only in the second or third inning, so the firm is rotating its money from the chip trade to power names.

  “So we are actually buying the power names today and actually lightening up on NVIDIA. For a while now, what I think is that the picks and shovels play is in the seventh or eighth inning, but the power play is in the second or third inning.”at 43:10

Quanta Services

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

• Chris Grisanti · MAI Capital ManagementBullish

  Buying Quanta: a high-quality power-niche name that gives downside protection and should win most contracts.

  Asked why Quanta, Crisanti says his firm is buying the power names after they fell 10 to 12%. He wants to own the highest-quality companies in the specific power niches, which he argues gives downside protection in volatile times. He expects these companies to get the lion's share of contracts as data center buildout continues, even as anti-data center governors are elected. The power trade is in the second or third inning, as opposed to the late-stage chip trade.

  “They're the high quality names in the specific power niches that they're in, Dom. And so we wanna own the highest quality. We think that'll give us downside protection on volatile times, and I think they'll get the lion's share of contracts.”at 44:01

GE Vernova

Across the shows: 5 speakers in other episodes, 6 bullish and 0 bearish calls, past 30 days

• Chris Grisanti · MAI Capital ManagementBullish

  Buying GE Vernova: a high-quality power-niche name that gives downside protection and should win most contracts.

  Asked why GE Vernova, Crisanti gives the same case as for the other power names. His firm is buying the power names after they fell 10 to 12%, targeting the highest-quality companies in specific power niches for downside protection in volatile markets. He expects them to take the lion's share of contracts, while data centers pay more and make concessions to proceed.

  “They're the high quality names in the specific power niches that they're in, Dom. And so we wanna own the highest quality. We think that'll give us downside protection on volatile times, and I think they'll get the lion's share of contracts.”at 44:01

AI infrastructure & data centers

• Jay Woods · Freedom Capital Markets

  Texas data center regulation is a speed bump; other states would take the business.

  Woods sees Governor Abbott's push for slowdowns and regulation as a speed bump, not the end of the data center build-out. If Texas restricts projects, the other 49 states would compete to take the business. He treats the regulatory risk as temporary.

  “This is a speed bump. It is not the end of the road. Far from it. If Texas is foolish enough to say not in our state, there are 49 other states that should be lining up to take that business away.”at 8:05

• Tobin Marcus · Wolfe Research

  Data center build pace will hold; states want conditions, not bans, and enough projects are queued.

  Marcus is relatively sanguine about data center activity, despite governors who won last night proposing moratoria. Even the strongest critics want conditions on water, power, labour and tax breaks, not a ban. He expects a market-clearing price to sweeten projects enough for communities to say yes. Permitting may slow for a time, but the project queue is large enough to absorb it.

  “I'm relatively sanguine about what's gonna happen to the actual pace of activity on the data center side.”at 26:09

• Stephen Byrd · Morgan Stanley

  Market is overreacting; only a small set of well-designed Texas data center projects will proceed.

  Byrd says the process set out by Governor Abbott, and what the governor-elect has outlined, will still let through a small set of projects that avoid water stress and higher bills and bring community benefits. Texas has about 90 GW of peak demand but more than 400 GW of proposed data center projects, so most must be swept aside. He expects a small share of projects to advance, and says the market's fear that no data centers will move forward is wrong.

  “I am confident that that small set of projects will move forward.”at 35:40

• Stephen Byrd · Morgan Stanley

  Market overreacting; most of 400+ GW proposed data center projects will fall away, while quality projects proceed.

  Byrd argues the market is wrongly assuming all data center projects get rejected. Texas has received over 400 GW of proposed projects, which he says is not doable, so most will be swept aside. A small set of the highest-quality projects will move forward. As an example, in Louisiana the large AI backers are offering big community benefits, such as an $8,000 raise for teachers and police and fire members, provided projects avoid damaging water use and air quality. He concludes a path exists, but only a very small share of the 400 GW in Texas will make it through the approval process.

  “The state has received over 400 gigawatts of proposed data center projects. That's really not doable... Most of those projects need to be swept aside. That will happen.”at 35:53

• Chris Grisanti · MAI Capital Management

  Anti-data-center governors won't stop the buildout; data centers will pay more and make concessions.

  Crisanti says anti-data-center governors were elected, but they will not stop an industrial revolution. What will happen instead is that data centers will have to pay more money and make important concessions. He expects this to happen and expects the companies that build the power for them to keep making a lot of money.

  “There were anti data center governors elected, but they are not gonna stop an industrial revolution. What's gonna end up happening is the data centers are gonna have to pony up more money and make important concessions.”at 44:16

• Chris Grisanti · MAI Capital Management

  Hyperscalers are unfairly treated; owning compute makes them the best risk-reward tech trade now.

  Crisanti says some hyperscalers have been unfairly treated by the market. Their earnings are strong, and they own the compute, which he calls the most valuable thing in AI. He argues this gives them the best risk-reward of any tech trade available, and says that if he had new money to invest, this is where he would put it.

  “I think that some of these hyperscalers have really been unfairly treated. And risk reward, I think that's the best kind of tech trade you can make right now. The earnings are strong. They own the compute, which is the most valuable thing in AI.”at 45:20

US stock market outlook

• Stuart Kaiser · Citi

  Strong earnings growth is the only thing shielding equities from wider credit spreads, higher yields and oil.

  Companies are posting double-digit EPS growth year on year and the economy is solid, with unemployment at 4.2%. Kaiser says this growth is the only thing that has offset wider credit spreads, higher yields and higher oil prices. Clients are worried that EPS growth slowing sharply next year leaves the market exposed to those pressures, and that heavy demand for capital is widening credit spreads while earnings decelerate.

  “That growth story is the only thing that's been protecting equity markets from wider credit spreads, higher yields and higher oil prices, right?”at 4:49

• Jay Woods · Freedom Capital Markets

  The post-election rally is a relief rally; the S&P 500 likely pulls back and stalls below 7,800.

  In the 2018 midterms the market rallied, then fell for six to eight weeks because of the China trade war, Fed hikes and a shutdown. Iran and Fed risks are still present, and Trump is an unpredictable factor, so Woods calls this a relief rally. He expects pullbacks, and says the rally will not take the S&P 500 to 7,800 in the next few weeks.

  “So, to me, this is nice rally, a relief rally, some of these names beaten down.”at 7:29

• Chris Grisanti · MAI Capital Management

  Earnings, not elections, will drive stocks; the election rally is unlikely to last without earnings support.

  Crisanti argues that earnings, not elections, will drive stocks in the end. Unless special factors are at work, investors should focus on where earnings growth will be strongest. He cautions against expecting the election rally to last long without earnings underpinning it. He still thinks the market can be strong into year end, and he says health care and hyperscalers are where he would put new money.

  “It's earnings, not elections, at the end of the day are gonna drive stocks... I would caution folks against thinking this election rally is going to last for a long time unless there's earnings underpinning.”at 44:39

Power demand & the grid

• Stuart Kaiser · Citi

  Citi likes the AI power trade fundamentally but exited in September because of political headline risk.

  Kaiser says his team likes the power generation and AI power trade. It sold that position in September because political headline risk was too high to bear. Kaiser also argues that the power trade was among the areas held back by the election, so it is a candidate for election-relief buying.

  “we love the power gen trade, the AI power trade. We took that off back in September just because we viewed the political headline risk as just too much to bear.”at 3:38

• Matthew Sigel · VanEck

  Bitcoin miners' idle grid capacity may gain value; mining can beat repurposing at about $15M per MW.

  Siegel says many Bitcoin miners fell about 20% on the Texas-specific data center issue. He argues Bitcoin's intersection with the grid may now be worth more, since miners may be holding orphaned power capacity they cannot convert quickly to other uses. He notes there is a price at which mining Bitcoin beats spending roughly $15 million per megawatt to repurpose the capacity. He also says the miners have round-tripped a lot of their stocks since they first announced the pivot.

  “Yeah, so many of the Bitcoin miners are getting hammered today, down 20% plus because of this Texas specific issue... Because a number of those miners may be sitting on some orphaned capacity here that they can't convert as fast as possible.”at 42:00

Pharma & biotech

• Asad Haider · Goldman Sachs

  Near-term MFN drug pricing codification risk looks off the table because of expected gridlock.

  Drug pricing is bipartisan, with MFN on one side and the IRA on the other. The Democratic sweep is likely to produce legislative gridlock in the near term, so the codification of MFN looks off the table. The bigger risk is IRA expansion from Democrats, which may come in 2028.

  “I think the question now is, just given the sweep that you've seen, that you're probably headed into legislative gridlock to some extent in the near term.”at 16:43

• Asad Haider · Goldman Sachs

  Pharma has re-rated from a 40% discount to parity with the S&P 500, backed by solid operations.

  The pharma sector traded at a 40% discount to the S&P 500 a year ago, narrowing to 27% at the start of this year and to 5-7% ten days ago. It is now at parity. Haider points to revenue beats and guidance raises from large-cap pharma, plus innovation in cancer vaccines, oncology and immunology. He says the three conditions for a pharma premium (a stable economy, confidence in innovation, and lower policy risk) mostly hold today.

  “So the result of all of that has been this consistent multiple expansion over the course of, call it, the last twelve months.”at 18:11

US deficit & government debt

• Tobin Marcus · Wolfe Research

  Next year's debt ceiling showdown is more likely than Q1 goodwill to produce a health care deal.

  Big legislative outcomes need a forcing event or leverage, and the debt ceiling is that event. Marcus says the debt ceiling showdown is more likely to produce a health care deal than both parties negotiating in good faith early in the year. Democrats want to roll back the health care cuts in the big bill, which Trump opposes.

  “So we are quite focused on the debt ceiling showdown next year. I think that's more likely to generate a healthcare deal than both parties just sort of sitting down in a spirit of goodwill in Q1.”at 25:31

• Matthew Sigel · VanEck

  Debt ceiling compromises under divided government will likely mean more spending and debt issuance.

  Siegel argues that governing, unlike campaigning, requires compromise, and the compromises needed around the debt ceiling are more likely to produce spending and debt issuance. He says that spending will alienate a large part of the electorate and trading partners who object to both the scale of the spending and the use of proceeds.

  “the compromises that are going to have to be struck here around the debt ceiling, especially, are more likely now to result in spending and debt issuance.”at 39:30

AI chips & semiconductors

• Jay Woods · Freedom Capital Markets

  Semiconductors will still lead the market; beaten-down chip names look good to buy.

  Woods likes financials for their new highs, but he says semiconductors will still lead the market. Semis are still breaking down, so he will wait for the damage to stabilise. He sees beaten-down semiconductor names as a shopping list to buy.

  “But the semis still going to lead this market. And right now we're still seeing breakdowns there.”at 7:29

Oil & fuels

• Stuart Kaiser · Citi

  Oil is a secondary risk for equity markets, behind yields, credit spreads and financing demands.

  Macro investors rank oil as the number one risk, but equity investors have been burned by oil scares several times and now place it third or fourth. Higher yields, wider credit spreads and financing demands rank above it. Kaiser says oil is a secondary risk for equities at this point.

  “So I do think oil is sort of a secondary risk for equity markets at this point.”at 9:51

Market sentiment, positioning & volatility

• Stuart Kaiser · Citi

  Post-election stock rally is a positioning-driven relief rally, as investors were under-positioned.

  Polls and prediction markets had already signalled a Democratic sweep, so the bad news was largely priced in beforehand. Once the result was known, investors who were under-positioned moved back into equities, and Kaiser calls the move a positioning-driven relief rally rather than a change in the outlook. He notes the rally is still avoiding the sectors most hurt by the election.

  “I think this was a positioning driven relief rally.”at 10:15

Healthcare system & insurers

• Asad Haider · Goldman Sachs

  Market is pricing out Trump's proposed hospital and Medicaid cuts, a tailwind for insurers and hospitals.

  Haider says the market is pricing out proposed cuts to hospitals and efforts to curtail Medicaid expansion, which would otherwise hit the big bill's health care provisions. That repricing explains the rally in Medicaid insurers, hospitals and utilization-exposed names. He says it is not yet known whether the cuts will be dropped, but the price action shows the market expects it.

  “some of the cuts that the Trump administration has proposed to hospitals and trying to curtail Medicaid expansion, etcetera, are probably off the table. Now whether that happens or not remains to be seen, but that seems to be getting priced in.”at 15:52

US elections & politics

• Tobin Marcus · Wolfe Research

  Trump stays influential; Congress is more likely to produce less legislation than more.

  Trump remains powerful over Republicans because primary challenges are the main threat to members of Congress, so he will not become a diminished lame duck. Any Congressional deal will need bipartisan support, which is hard in an acrimonious environment. Major legislation will probably require a forcing event or leverage, so Marcus expects less action rather than more.

  “I would bet on less rather than more action.”at 25:18

Stablecoins & crypto policy

• Matthew Sigel · VanEck

  Altcoins, tokenization and stablecoins face SEC and CFTC rules a Democratic wave could reverse.

  Unlike Bitcoin, which has little regulatory uncertainty, Siegel says altcoins, tokenization and stablecoins are where the market may start to differentiate. He points to rules the SEC and CFTC have put in place that could be reversed if the Democratic wave continues over the next four years.

  “Now you can debate around the altcoins and tokenization and stablecoins where I think the market might start to differentiate and look at some of the regulations that the SEC and CFTC has done and what might be reversed if the Democratic wave continues”at 41:22