Power Lunch - Nasdaq , S&P 500 slide as China's DeepSeek triggers AI rout 1/27/25

Episode Date: January 27, 2025

The S&P 500 and Nasdaq are lower on concerns about an AI stock bubble popping because of the emergence of Chinese startup DeepSeek, which has possibly made a competitive AI model for a fraction of the billions Silicon Valley is spending. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Kelly Evans. You're going to see in just a second here. I'm Dominic Chu. We got a major tech sell-off today. Invita getting crushed. China's Deep Seek says its large language model was developed cheaply and quickly, so maybe companies don't need to spend quite as much money on some of those Nvidia chips, maybe. Mark Andreessen calling this AI's kind of sputnik moment, the beginning of the AI race between China and the U.S.

We're going to talk about the dangers if the U.S. does fall behind this race against China. And as part of the unwinding of that AI trade today, investors are pulling the plug, so to speak, on energy names. Some of the last year's biggest winners are now taking a massive move lower on all that nuclear power generation, Kelly. To the tune of 20 percent or so, Dom thanks. Let's look at the broader markets. The Dow's actually fought into positive territory of a third of 1%. But the SMP is down nearly 2 percent. and the NASDAQ is tanking by three and a half percent today.

Let's look at where. InVIDIA, worst day since March 2020. It's shed about half a trillion dollars in market cap today, losing the three trillion mark. And as the session continues, interestingly enough, it kind of continues to pick up steam in the selloff. It's down now more than 17%. Now, those energy names as well, which had been big winners on hopes we need massive power for the AI boom. Well, investors are we thinking that today? Vistra's down 28%.

constellation 20% talent down about the same amount, Dom. All right. Well, the markets lost in deep thought over Deep Seeks claims that have built an AI model in just a couple of months for less than $6 million, not a B, million dollars. It's a tiny fraction of what U.S. companies are spending on artificial intelligence buildout. Most of the pressure is hitting Nvidia, as Kelly points out. But scale AICCE CEO Alexander Wang, told Squawk box just last week from Davos that the Chinese startup has more invidia chips than it's willing to admit.

My understanding is that DeepSeek has about 50,000 H-100s, which they can't talk about, obviously, because it is against the export controls that the United States has put in place. And I think it is true that, you know, I think they have more chips than other people expect, but also, on a go-forward basis, they are going to be limited by the chip controls and the export controls that we have in place. All right, so with that in mind, are the doubts around the AI trade justified or is today's sell-off just a buying opportunity for some of these names? Joining us for more is Dan Ives, the global head of technology research at Wedbush. Also here with us for the whole hour is Nancy Tangler, CEO and chief investment officer at Laffer-Tangler Investments. Thank you both for being here with us right now.

Let's talk about, Dan, the epicenter of all of this. And you've been a notable bull on many of these companies, many of the technologies that are at the center of the melting. down today. Does this worry you? I mean, in my view, it's a top three buying opportunity that I've seen in the last decade for tech. And the reason I'm saying that, I spend the whole weekend talking to tech executives, CIOs, individuals that I know that are going down the sort of AI arms race or going through use cases in no way of really 25 companies. Does this change their sort of plans? and a lot of these could be seven, eight,

you know, even upper eight figure type budgets. I just continue to view this is it's a model. And a lot of the details, I think, still need to be vetted out in terms of $6 million. Do they actually have the H-100s, how they actually built it? But this is something we're going to look back on, and I think the street and the market got this way wrong.

In no way does it then are both these. So that's what we've been telling clients, really, since the weekend. These are the times you own these names. Dan, not all. of the companies at the center of the sell-off today are necessarily affected the same way. Chip stocks, NVIDIA, Kelly mentioned it, a half a trillion dollars in market cap lost, that's more than the size of ExxonMobil, that's roughly the size of United Health Group

in terms of an entire company lost in market value. Some are affected more than others. Mega-cap technology, not as much so across the board as, say, Nvidia per se. When this is a buying opportunity, how much of a buying opportunity and how, how specific do you have to be? Well, first on Nvidia, that continues to be, I think, the golden goose in terms of what Jensen and that company are ultimately, there is one chip in the world. There's one GPU that's fueling AI, and it's Nvidia.

And when you think about these buildouts, when we talk about the enterprise, the two trillion of AI capax next three years, that doesn't change from DeepSeek. We're talking about one-one thousands of ultimately the buildout that you're going to need for a lot of these enterprise use cases. You look at names like Pallantier. You look at the hyperscaleors. I could argue with inferencing if you actually think costs are coming down,

it's actually bullish for even some of the software players, names like Salesforce, Service Now, Oracle and others. I just think this is when you look at Nvidia, I think we sit here six, nine, 12 months from that and look at this as a moment. It was a golden buying opportunity, and in no way changes our bull thesis for where this is all heading.

Nancy, let's bring you into the discussion as well. but this is one of those situations where the markets have sold off, but they're not that far away from record highs. This has been not that debilitating at all. It's for yes, NVIDIA, for yes, Broadcom and others, but not everybody, right? So does this change the market thesis? People are wondering right now whether this is the beginning of a larger scale sell-off in the broader market. No, I don't think it is. And I think one of the things I've learned in this business is you have to know who to listen to.

And Dan has been 100% right on this space and in his coverage. He's also lived through previous periods like this, like I have. And what you learn from that is this is driven by the algos and the hedge funds in the short term. And I pointed out in my notes that, you know, the average hedge fund total return over the last decade is 8 to 10% annually. That is well below the average active manager. So you use volatility as your friend of the long-term investor, which is what I am. So I would say today it's traders, and we've got a buying list, and we were planning to add to Nvidia anyway.

So we will be adding one of my five for 25s is Broadcom. I can't explain to you why it's getting hit as badly as it is. More so than Nvidia, and it's half software. So it's a 50-50 company that's got probably one of the best CEOs in the world. And don't they do custom silicon? I thought part of this whole shift was that we'd ultimately go from these massive training models that require a ton of these Nvidia chips to something more specific

and more inferencing base where you're working with companies and that would favor broad companies. So I find it so interesting that, again, the market clearly knows more than I do, so I'm just wondering what that is. Not on a minute-by-minute basis it doesn't or on a day-to-day basis.

And I think that's the difference. Dan's doing the research. I don't pretend to be as expert as he is in this space, but I do know the management teams and I do know the theme that we're pursuing and I think it's still intact. Old economy companies that are pivoting. to the new technologies and then the suppliers.

And you and I talked about shifting to software, I don't know, a couple months ago. And we've done that, and yet I still think you want to. And to your point, 80 billion, then the Dell and Microsoft spent, 65 billion, that's not changing from this. To something I could argue, you could almost increase. So it just speaks to as-

In what way would it increase? Because like you said, whether you love or hate what's happening, there are, people are starting to build more deflation into these KVX models, but you think maybe we could even see the opposite. Yeah, so you have 4% enterprises in the U.S., remember, not even around the world, that have gone down the AI path. Wow. If inferencing and the use cases get cheaper, that's more for the hyperscalers.

That's more chips for Nvidia. That's our view of the multiplier. But here's one of the issues being brought up today specifically, and the reason why some of these stocks, chip stocks specifically, are moving the way they are, server companies, data center type companies, is how much money do you actually? actually need to spend. And by the way, do you need Blackwell, right, to be able to do this? Could AMD have a product out there that could do something better? Could other chip companies in China? Could Huawei? Is this going to be a commoditization story where this is about finding the least common denominator, having a model that's good enough to do some kind of a job and doing it for a tenth

of the cost of what's being anticipated right now? And to that point, look, I'm playing in the Super Bowl and Nexus Aquin the same chance that they spend. $6 million. So the point is like it's my view that like this is much bigger than I think they're talking in terms of ultimately the hardware and actually the build out. I can tell you from hundreds of companies

in terms of what they're willing to spend. Those Nvidia chips, that's the new gold or oil. I'm not saying there's not going to be alternatives, AMD and others that will come competitive-wise but I just think the street is taking these numbers and going with it. And I could tell you, someone's spent basically

the whole weekend checking with across Silicon Valley, VCs. I just think the market's getting it wrong in terms of where this is going to, where this ultimately is head. Is there anything they're getting wrong? There's a couple of green spots, Apple and meta. Everyone seems to think they benefit both in the long run from the deployment of AI. But Microsoft is a little bit more of a battleground name.

So it's almost like, are they also getting those pieces right? And if so, does that translate for you across the industry? Sure. And those are great points, because those are right in terms of Apple. Because we've always said the app store. And it was like they will own the consumer. AI revolution. You look at Meda and me and Nancy talk about that that could be bullish as well. I think what they're getting wrong is just what this could mean for the hyperscalors, which

is going to be bullish. We'll see that this week, but especially in video. And this is one, to take them out of this equation, I mean, they're the foundation of this whole build out. You know, Nancy, I remember, I can remember maybe six, seven years ago at this point. I was out in Tennessee at Oak Ridge National Laboratory, sitting down with Jensen Huang, then IBM CEO, Jeannie Remedy, and then Energy Secretary Rick Perry, talking about supercomputing and the race against China to create the biggest and most powerful supercomputer. Now it's El Capitan out in Lawrence Livermore National Laboratories. Back then it was Summit out at Oak Ridge. This is going to be the secular theme for decades to come, the U.S. versus China. If this is just a blip, how exactly would you be strategizing as a long-term investor about how to position for that AI U.S. versus China trade? Yeah. No, that's a great point, Dom.

And I think Dan said it earlier that the spending is going to increase. And I think we can infer that from a CIO study that was done by Bernstein that said only 8% of CIOs have large language models in their budget. And so if that's true and we think it is as important as you just stated, then you want to still want to, you to still want. want to own the industry leaders because they will find a solution. They will either, you know, look what Elon did by cutting electric vehicle prices. He drove his competitors to some extent out of the business. Yep, it hurt his margins, but he claimed market share. So I think, you know, a couple weeks ago, Apple was downgraded and left for dead, and now it's up today. So you have to step away from the noise and from the algos and take, you know, take your shopping list, look for the

industry leaders because they're going to find a way to win. Quickly, any other names you want to drop on that list? We've talked about this in the past, but software specifically or anywhere else? Dan said it's service now. And Pallantier, you know, that can, and then you look at names like Oracle, where are they even playing in the TikTok situation? This is just more and more strength for U.S. And trust right now in the two or two era code, they're watching the story front and center

in terms of those chips as those export controls ultimately take, you know, take hand. You know, Kelly, you notice that he did drop the Saquan Penn State. line in this discussion, right? Listen, I mean, we're talking about the best of the creme de la creme. I decided Dan's the Bob Dylan. Oh, I like. Like that.

He doesn't need any more, you know? Come on. Nancy, you stay. Dan, thank you. Really appreciate you coming in today. Dan Ives on this sell-off. The AI-led moves here are rattling investors, but remember, if you look at the S&P, it's not all red. The indexes are a little top-heavy, but the question is

whether this is the first domino in a larger market route or not. We will get an expert take on that after this. Stay with us. Welcome back. We are watching shares of NVIDIA down 17% on the arrival of Chinese app Deepseek and its latest R1 model onto the scene. It was the talk of the weekend as everyone was messing around with it. Invita itself has now come out and made a comment about this. They say Deepseek is an excellent AI advancement and a perfect example of time test scaling, adding that the work illustrates It's how new models can be created using that technique. It goes on and says inferencing requires significant numbers of Nvidia GPUs and high performance networking.

And it concludes by saying we now have three scaling laws, pre-training, post-training, which continue and new time test scaling. Dom, this comes from a spokesperson trying to emphasize that even as we shift from training to inferencing these models, they will be at the center. Well, and it's not just that. This idea that, you know, they are right now, you can argue the only game in town with regard to the processors that it, takes to perform this kind of work. We had just had the discussion with Nancy and Dan about what does this mean? If you can find a low-cost solution, can you use other people's chips, whether they're Chinese native companies or whether there are other companies here in the U.S. that are not named NVIDIA. Well, this is NVIDIA's way of now saying, you know what,

ours are still the best product on the market. They are still the backbone, the infrastructure, the building blocks, the mortar, if you will, of all of this AI revolution. Yeah. And so that's what they're trying to. I mean, Biggest one-day loss of market chair in history. In history, by the way. We mentioned before that the half-trillion dollars in market-cap loss, this now does with the number crunchers rank as if it holds the single biggest market-cap loss in market history. And by the way, again, for perspective, half a trillion dollars is like losing a MasterCard or a United Health more than an Exxon mobile. And by the way, you tack about a couple hundred billion dollars more, and it's like losing an entire JP Morgan off of the, off of the face of the earth, market cap-wise.

So this is a big deal. session lows as well. Our next guest says Deepseek is a legitimate disruptor. He's out with a new note highlighting three bad signs for the market that could even push the S&P into a correction later this year. Barry Bannister is Chief Equity Strategist at Steefell. He's got the lowest year on target on the S&P across Wall Street at 5500. Nancy Tangler is still with us as our guest host. All right, Barry, I think you and Nancy, I mean you are like two very different points of view here, so this could be fun. But give us the, I hate to call it the glass half empty take, but explain to us how you see path towards a significant correction here.

Yeah, keep in mind that even on a good micro story, macro sometimes rules. And the markets pretty much ignored the macro on the AI hysteria the last, oh, I don't know, year. But the macro is starting to catch up. Inflation is sticky. I don't think the Fed's going to cut rates again. Frankly, the 10-year yields too low if inflation pre-year. is very sticky and the Fed doesn't cut. And price earnings multiples just got too high. And I think we

had to let some air out of the balloon. And we come down on the side of about 10% lower by the late 2025. So, Barry, you don't look at this and go, power stocks 30% off, you know, leading chip stocks 20% off. This is a top three, as Dan put it, buying opportunity. No, it's definitely not of buying opportunity. You know, I have some trouble with the way that the big tech companies with monopolistic cash flows are redeploying the cash into a, from a high REOIC business to a low return on capital business, even if it has the unit sales growth and the initial buildout of the models to the S&P 500 type companies, it's going to have a very competitive landscape. And are they going to earn this capital return that they?

they need or should they have just given us the money back instead of spending it? Barry, it's Dom. One of the big questions facing many investors today is this fear that this could be the triggering of a larger sell-off, one that we haven't really, really seen in quite some time now, aside from the 5% pullback that we got over the last couple of weeks entering here, is there anything that would suggest to you that anything else could trigger any kind of broader market decline at or near record highs like we are right now? Well, over 30 years ago, we used to joke about how technology was such a displacement event business where new competitors would come in and destroy the entrenched stocks, that it

deserved a lower multiple because of that. It's a short life cycle business that's got a very short competitive advantage period. But investors forgot about that. They bid up the stocks. The growth relative to value large cap total return, one divided by the other, on a 10-year compound basis, reached the absolute outer limits of the past 90 years. And that exact limit line is exactly where it peaked, the price earnings multiple and the outperformance of growth. So for us, it's just a very bubbly, embellion market that's just kind of take some air out of it. Curious, Nancy, if you want to respond to any of that. And also to add, this was a point of view Barry's had where he says, you know, we have risks from amid the euphoria, the Trump bump, American

exceptionalism, MAG 7. A lot of people are wondering if we've all gotten a little too excited about these themes this year. I mean, maybe, Kelly. And, you know, Barry and I were both in the business in the 90s when you had a Fed funds rate above 5%, you had inflation above 3%, and yet the productivity-driven growth that was produced by the Internet, just the Internet. And, you know, John Chambers has since come out and said, and he was the CEO of the poster child of overvaluation. Cisco has said that generative AI is more powerful than the Internet and cloud computing combined. So I do think that, I don't think this is a bubble. I don't think the valuations have gotten way out of whack.

Invidio was trading at a price earnings to growth ratio just a little above one times before the sell-off. So we're going to look for opportunities. I mean, I don't think you chase it tomorrow necessarily, but let it settle. And then I do think this is a buying opportunity. So, Barry, I guess that's what makes a market when I'm on one side and you're on the other. But I think this is an opportunity for long-term investors to add to holdings. Why isn't she right, Barry? Well, let me put my economist hat on for a second.

If you look at what's called non-farm output per hour, labor productivity, there have been 13 recessions since 1942. 13. We think that 2020-23 was a recession. If you look at every measure, income production, sales, fixed investment, even employment, some of the data like the SOM rule on permanent unemployment did trigger. So when we had this recession that we never really acknowledged, we emerged from it and productivity, as it always has in the post-war period every single time popped about five percentage points from minus two to plus three, year over year. The important point on that is that productivity is set to slow this year, slow sharply. That keeps unit labor costs and inflation high and keeps the Fed very unhappy.

So you can buy the long-term productivity argument, but I think in the near term is going to be very disappointing for the market. And, Barry, anything you'd add in terms of, okay, now we have this AI. particular kind of problem for the market to contend with. But anywhere else you'd be looking for froth? Froth, no, but we are favoring what's called a defensive value positioning for this year. This is health care, staples, utilities, some of the food beverage and tobacco stocks and so one, and that would be an anticipation of a pullback in the market, a drop in everything cyclical, from, you know, machinery, cyclical to a technology cyclical, like a semiconductor, and a rise of

defensive. Yeah, we're definitely on that trade. All right. Barry, appreciate it today. Thanks for joining us. Different view. Barry Bannister of Stiefel. All right, the AI selloff is extending beyond the technology players directly involved. We're seeing declines in the secondary and even tertiary AI plays. The derivative one. For example, check out utilities in the power space. Details on Power Lunch straight ahead. Keep it right here. Welcome back to Power Lunch.

Tech stocks are selling off today. As you can see, the NASDAQ composites down by 3% right now. We're also seeing a pullback in bond yields as well. So let's bring in Rick Santelli for that side of the story. There's a bond auction. There's the flight to safety. All kinds of things putting upside pressure on prices, Rick, and downside pressure on yields. Yeah, you know, you bring up a good point, Dom.

And that's the lesson to live. learned today. Every market, even when they get ugly viewers, there's lessons to be learned. And the lesson today is that equities moving down in a very aggressive fashion still makes fixed income treasuries a flight to safety harbor. Many have wondered if we're going to see that relationship. You know, we've seen it over the last 25 or 30 years that was really cemented in 1987 during the market crash when treasuries, well, they locked up limit pushing yield. down very similar to today. Let's look at a two-year on a 24-hour chart with S&P futures, and you can see exactly what I'm talking about. They're exactly the same. Now, if we pull a 10-year

on a 24-hour along with the dollar index, you see the same relationship, but with this one down, I want to put some asteris. Right now, the dollar index is not down much on the session. and 10-year yields are down about eight basis points. So even though the pattern looks similar, they're starting to diverge as you see. Why? Because the dollar index has a confusing role in a safe harbor trade. Many will like to buy that or maybe buy the yen. But in the end, it also seems to follow interest rates that go up, the dollar goes up, and vice versa.

So these relationships are something to pay attention to and just, Remember that in the end, many markets historically get over their skis. It doesn't mean the trend is no good. It just means the trend was a bit carried away. Kelly, back to you. Trend is your friend until it turns against you. Rick, thanks. Still to come on power lunch, President Trump's first term focused on being tough on China.

Heading into his second trade and tariffs remain key, but he has seemed to back off on China specifically. Could Deep Seek change that more next? All right, welcome back. Let's focus now on the China side of today's big tech sell-off. Deep Seek, number one in the Apple App Store, saying today it is seeing so much demand, it's had to limit the amount of new users it has on the platform. Our next guest says that China's Deep Seek is a legitimate threat, and he thinks U.S. tech companies need to take China a lot more seriously. Dennis Unkovic is a partner at Meyer-unkevik and Scott. He advises U.S. companies doing business in China. Dennis, like I pointed out before, we were chatting with Nancy and Dan Ives about this.

This is going to be the theme for the next one, two, three, four, five decades and beyond, this kind of adversarial racing relationship between the U.S. and China. So what exactly does today tell you and what exactly are you telling your clients about how to take China seriously about? Dominic, since 2015, Xi Jinping said, I want to have a China 2025 policy. He then looked at 25 basic technologies. One of the most important was AI. And he said back then and has been pointing out that by 2030, he wants China to be the most predominant country in the world in the AI field.

And I think this is really the opening salvo. Is the Trump administration going to be open enough to understand how business leaders need to tackle the AI threat from China in order to craft, that keeps America competitive and ahead of China. Well, what the Trump administration has done so far is to say, let's talk about tariffs. But I think this is greater than tariffs, because in the long run, the interest of the United States is to have the leading technology in the world.

Today, if you take technology, maybe two-thirds of it is Western, one-third of it is Chinese. It's clear to me that what the Chinese want to do is to move the needle so they're at least 50-50. And what this means, Dominic, in the future is you're going to have a country that's going to have to say, what kind of technology do I want to adopt? Is it technology from the West or is it technology from China? So I think this is a strong opening salvo of the Chinese to the U.S. saying, if you want to put tariffs on me, this is the way we're going to go. Dennis, it's also interesting. We were talking to a security expert last hour who reiterated that whether it's TikTok or Deepseek, you download this onto your phone. It can collect what you're

doing your activity, your English language activity to trade its AI models and the more up-to-date info it has, the better. So I deleted it. I was like, forget. I couldn't log in anyway because of the problems they're having this morning, but it does seem a little odd that at the very moment we're cracking down on TikTok, along comes deep seek and we're all doing this all over again. And it's an AI app. I would on my phone and I have delete it just like you, Kelly, because in the long run, their ability is not just to collect information. TikTok is maybe a bunch of teenagers looking at something, making themselves more attractive. But when you're downloading information on an AI source, which is business or government-related, think about the fact that you're opening the door

to the Chinese saying, well, here it is if you want to take a look at it. That concerns me very much as an American and somebody who advises not just U.S. companies, but companies around the world. Dennis, this is Nancy Tangler. I wonder if you find the timing at all curious or strategic, perhaps, in this announcement. I mean, many have known about it. In fact, CNBC broke the story a while ago on Deep Seek. But what's your thought about that and how the Chinese are using this as a tariff rhetoric, rhetorical device, if you will? I think you use the perfect word, Nancy. It's strategic. As the Trump administration over the last, what, four or five days, has like 100 presidential announcements. China has been interestingly in the back. So I think that

the Chinese have said, okay, this is a good time for me to step forward saying, here's a product. It's much less expensive and equally effective to large Western companies. Take a look at me. I think they're essentially saying to the Trump administration, we're serious and you better understand that. That's all just a big, big game of very complicated chess here between the U.S. and China. Dennis Oncovic, Meyer, Unkevick, and Scott, thank you very. much. We'll see you again soon, sir. Thank you, Dominic. Let's get the perspective from China now on the ground. Unis, Unis, Live in Beijing with the reaction, Eunice to DeepSeek and our reaction here about it. Hey, Kelly. Well, the talk here is that DeepSeek may be having some capacity issues. Users tonight have been complaining that the service has been stalling.

And this is after the company had issued a statement earlier saying that it's being subjected to large-scale, malicious cyber attacks. Now, the company has says it's temporarily halting some of its signups, that some of its registrations would be slow. Otherwise, though, as you guys were kind of suggesting, the country here, and especially in state media, has been really hailing this company as a national triumph. State media has been describing Deep Seek as China's dark horse in AI. They've been pointing out that the company has staff that has almost no experience overseas. so all homegrown talent and company. Shin Hua, the state news agency, said that China's AI has managed to thwart the U.S. tech curbs.

And what's also interesting is that images of the founder, Liang Wenofeng, he is on state media, a meeting with the Chinese premier among some of the other Chinese entrepreneurs who were able to meet the premiere last week. So a lot of good feelings around this particular individual. Eunice, as we kind of digest that, how do you think they're going to react if the U.S. ends up having to crack down and say, okay, Americans, we advise against you downloading this app. And also this big question about export controls. Yeah, perhaps they backfired, allowed them to train a little bit more cheaply or with inferior technology. But it's still the feeling here that a lot of Chinese would like to get their hands on a lot more of the leading edge of Nvidia chips.

And it's worth keeping those export restrictions in place. Yeah, absolutely. I think that the country and especially the government would react very badly to the idea that expert controls are going to get even more fierce, especially because what was interesting about the discussion tonight that we're hearing about the capacity issues is that this is one of the reasons why the founder has said that they need more chips, that they need more of this American technology. So it wouldn't be something that would be looked upon or welcomed at all within the business community and then also, of course, within the government as well. All right, Eunice Yuni live in Beijing. Thank you very much for that. We'll see you soon. And let's get over to Kate Rooney now for the

CNBC News Update. Kate? Hi there, Kelly. Both engines of the Jiu airplane that crashed last month in South Korea contained duck remains. That's according to a preliminary report released today. But there is still no final conclusion on why the plane overshot the runway to make an emergency belly landing

before it crashed into an embankment and killed all but two of the 181 people on board that flight. The head of the Public Integrity Unit, meanwhile, the Justice Department has resigned. That's according to NBC News. It comes after reports last week that Corey Amundsen was among the DOJ officials being reassigned to take legal action against so-called sanctuary cities. He played a key role in both of the DOJ investigations into President Trump, which were dismissed after he won re-election. And a federal judge dropped restrictions today on some January 6th defendants from entering Washington, including Oathkeeper's founder, Stuart Rhodes. The order was initially put in place last week after Rhodes visited Capitol Hill days before to defend his actions on the day of the riot.

President Trump commuted the extremist group leader's 18-year sentence as he took office earlier this month. Kel, back over to you. All right. Kate, thank you very much. Kate Rooney. CNBC is accepting nominations for our 13th annual Disruptor 50 list. You know, I've heard Deepseek quite a disruptive app for private venture-backed companies. Are there any qualifications that it's an American one? Scan the QR code on your screen to learn more or go to CNBC.com slash disruptors, and we'll be right back. Welcome back to big story today is the chip sell-off following China's Deepseek success,

which is changing the narrative around chip demand. Invidia is down almost 18 percent now. And what about power demand? Was that overstated as well? Vistra Constellation and others are down by even more, 20 to almost 30 percent in the case of Vistra. Brian Sullivan joining us on the phone right now. I was saying calling it on his day off, but it's not even really a day off, Brian. You're just not here with us. And what do you make of these moves? What are you hearing about them? Yeah, thanks, Kelly. I'm down in Florida. What a day given a speech. And everybody's talking about this. And I want to call in and thank you because here's the reality. You mentioned Vistra Energy, VST, and I've reached out to all. all these CEOs, by the way, and getting some comments, some not. This was down 29% to your point. Okay, Constellation Energy is down 20%, C.EG.

Now, if you believe that this new DeepSeek is going to wipe out demand for power for AI by 15, 20%, and thus reduce power processing needs, then maybe, I don't want to say this is the correct move. It's not my decision to decide whether or not a move is correct. But I think what we have learned is that many of these stocks may have been priced to perfection. In other words, these are supposed to be boring old utilities that barely move, but yet have moved huge on this AI power demand story. The one thing I wanted to add, Kelly, is that it's not just utilities. Take a look at the companies that are going to pipe gas to the utilities. The WMB, KMI, Kinder Morgan, ET, Energy Transfer, LB, Landbridge, those, what they call pipeline

or midstream stocks, they're also down 10, 13, 14%. What, I mean, so Brian, when people say, well, is this a moment like in the 90s when what we thought we needed for the build out of the internet, we actually didn't need or at least the valuations that were applied? Is this that kind of moment? I think we're going to find out because I think to your point, I know that, you know, You and I get some of the same emails and your frequent guests, John Spalanzani and some others, you know. The idea is sell first, learn or ask questions later.

And you look at it, okay, GE Renova, bring up GEV as your stock ticker. I'm on the phone so I can't see it. That stock, it's a power company. They're down 22%. Okay, Broadcom, ABGO, chip stock. I don't know much about it. I know Christine and others do. It's down 18%.

Here's the point. I think Wall Street today is selling first. and asking questions later. We're going to have a lot more comments on the CEOs. I will remind viewers that we had the CEO of Nextair Energy on Power Lunch. I think it was on Friday, Kelly. I'm getting old, so the time is going pretty quick. And the reminder that he made, their stocks not down much,

they could actually might even be higher. N.E is the ticker, is that what he said to us was that they expect five to six times, times an increase in power demand across the United States. Some of that is AI and data centers, Kelly, but a lot of it is just the re-onshoring of manufacturing and the electrification of the American economy. It's not just Nvidia and AI. Great point.

Brian, appreciate it very much, as always. We'll see you tomorrow. Thanks. Brian Sullivan. You know, Kelly, it's interesting. Vistra's down 30% right now. Yeah. It was up 230, 3%.

3% over the course of the past 12 months. Oh, she's best stock last year, I think maybe this year in the S&P. Anyway, coming up on the show, on a down date for stocks overall, Nancy Tangler will offer some of her top picks for 2025. What's on her shopping list, she alluded to it. That's coming up next in three-stock lunchtime. Welcome back. It's three-stock lunchtime. Nancy Tangler is going to give us some of her top picks for 2025.

And the first one is highly relevant today because it's Broadcom. Down almost 20% in this tech sell-off, having its worst day since March 2020. Nancy, why is it still a top pick for you this year? Yeah, well, I think, you know, I wrote this on December 29th, and I was a little reluctant because the valuation was high-ish, not super high, but high. And so I think what you want to pay attention to is how does this company act over the long term? We bought it with the CA Technologies acquisition.

I was actually on set down on the New York Stock Exchange. Wall Street hated it. The stock sold off dramatically, and that's when we initiated our position. And over time, the company has had a very powerful capital allocation plan back to shareholders. But most importantly, you've got a CEO in Hawk Tan who is disciplined, who can take an acquisition and make it accretive very quickly, and who recently came out and said with existing customers, we see a $60 billion revenue opportunity with AI. That's with existing customers. They've added two very large customers since then. I don't think deep seek changes that.

And I think you're getting an opportunity to buy in at much lower levels and then get paid to wait. They just raise the dividend 11%. So you're just going to continue to get paid to wait as the company continues to evolve. I also appreciate the fact that ticker is still Avago right now. Avago. Legacy company. Hawk Tans company. Anyway, next up is Goldman Sachs.

Lower today, but on pace for its third positive month out of the last four. Nancy, you say it should benefit from a more friendly regulatory environment. and as M&A trends start to accelerate in this new administration. Take us through why. Yeah, and I think what we haven't heard today, Dom, is anything about the administration and what is likely to happen with regulatory relief and potentially corporate tax cuts. So even if the Trump administration 2.0 doesn't get to 15% corporate tax rates, at 18%, it adds 4% to S&P earnings.

So what's a likely beneficiary if companies are not getting Lena conned? It's M&A and Goldman's going to lead in that. Plus, they are adopting AI in many aspects of their business, which is why I think we're just in early innings, as we were talking about during the break. So I think this is a name at 13 times this year's earnings and 12-5 times next year that you want to own it for the long term. Also a nice dividend, getting paid to wait.

We'll see if we get really a bigger and bigger deal boom this year. It would be interesting. Let's move on to Spotify, which is on pace to snap a four-session win streak, so it's actually moving just slightly to the down. side, but you're sticking with this as a big growth story. Yeah, it's been in our portfolios for a long time. We just put it into our 12 Best Ideas portfolio in the fourth quarter. Daniel X said 24 was the year of monetization. They did just that, generated earnings, and now we've got 58% earnings growth off of albeit low numbers this year, 28, it decelerates to 28% earnings growth,

trading at an attractive price earnings to growth rate. And I think a recession-proof name, if you think the economy is slowing, even if you don't, this is an area that it's a very stable. It's like a technology staple. It's crazy, though, because you think, but there's Apple Music. There's all these, there's YouTube. Competitors. How does it keep its mode, but it does. It's better. And the Joe Rogan, you know, offering it up on other platforms, that was brilliant and showed their ability to pivot. So advertising is growing very quickly as well. Great. All right, Nancy, thanks. Remember, you can know. Oh, Dom, you can tell folks.

I can remember and can you remember. Yeah, our podcast. You can always hear us on the podcast speaking of Spotify and everything else. Please be sure to follow and listen to Power Lunch wherever you go. Power Lunch in audio format, podcast format. We'll be right back. All right, welcome back. Let's give you a quick check on the markets right now.

The Dow is still holding on a gains up 226 points at this point. The SMP is down about 1 and 3 quarters percent. That's roughly where it's been the last couple of hours. 59.92. And the NASDAQ composite still now down 3.5%. 19,246. Kelly, remember at the lows, we were down roughly 720 points, and that's pretty much a stone's throw from where we are right now. I know, Nancy, we're not supposed to watch too many of these movements, you know, day to day or moment by moment, but I will be very curious what kind of bounce we get or don't get tomorrow. You know, are we going to come back and make up 10% ground on some of these names, or is it going to be a holding pattern for a while?

Yeah, I don't think we're going to bounce. I think you're going to have time. viewers to be deliberate and thoughtful as you as you accumulate names. But let's not, I mean, if this was a disaster as it's being really projected to be, the NASDAQ would be off 10%. And we were down over a thousand points pre-market. I think it's settled in. It's the algos. You wait.

You see what the news is. And I think you have to look with skepticism at what we're being told about. Does it also make you feel better that we're not seeing a massive wholesale let's scale off? That means it's not leverage-based, right? It's not people having to force sale all of these things. Even with some of these widely held momentum names, the staples are doing quite well today.

I don't know. You know, it sounds like Barry Bannister over here. Playing up the defensive portfolio, but those are parts to watch. But they are trading at lofty valuations with very low earnings growth. True. So, Nancy, thank you so much for joining us this entire hour. It was awesome.

Thank you very much for that. Thanks for having me. Thanks for watching Power Lunch, everybody. Closing bell starts right.